The Secret Plot to Prop Up the Municipal Bond Market
Back in September of 2010, I wrote:
Governments like to operate deep in complex technical details, when they are up to really no good. Few in the general public understand or pay attention to complex technical details of obscure regulatory moves, though those moves can be highly damaging for a country's citizens.In Basel, Switzerland, global banking capital regulations, known as the Basel III rules, are in the process of being finalized. The rules are nothing but a stunning move by governments and the elite to direct money flows in their direction.Developments since then support my earlier concerns. In fact, it is worse than I expected. Not only are capital regulations, written as parts of Basel II and Basel III, driving banks to hold government instruments such as US Treasury securities, but it is also driving banks to buy junk municipal debt.
Reuters reports today:
European Union policymakers paved the way for the region's banks to load up on U.S. municipal debt by creating a loophole that lets them hold minimal capital against the bonds of local authorities like Detroit, which buckled last month under debts of $18.5 billion.
EU banks, including bailed-out Belgian lender Dexia (DEXI.BR), could together face hundreds of millions of euros of losses from the bankruptcy of Detroit....MORE
