California’s treasurer today asked six banks that underwrite municipal bonds for his office to say whether they bet against the state with credit default swaps and how much swaps are sold to investors who don’t own the debt.
Treasurer Bill Lockyer sent letters to Bank of America Merrill Lynch, Barclays Plc, Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley, as a follow-up to questions he sent them in March.
Lockyer said he is concerned that speculative trading of credit default swaps, the buying and selling of the insurance contracts by investors who don’t own the securities, could boost borrowing costs. He said that may occur if the transactions create an unjustifiably negative perception of California’s risk of default.
Read on.
Here are the letters sent by the Lockyer to the Bank CEOs. Click here.
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