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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: abuelita who wrote (71767)	12/17/2009 3:45:01 AM
From: Haim R. Branisteanu	Read Replies (2) \| Respond to of 74559

California Bonds Fail on Advice Bill Lockyer Couldn’t Refuse (my remark - wonder why no officials go to jail) By Michael B. Marois Dec. 17 (Bloomberg) -- For California Treasurer Bill Lockyer, the offer from Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc. was too good to refuse. If California were willing to forgo competitive bidding for a $4.5 billion bond offering, the banks promised more orders from individuals and a lower bill to the taxpayers. The firms insisted that by negotiating with them, the state would benefit from its special relationship with the Wall Street troika and wind up with what two underwriters called a salutary “buzz” to boost demand for the debt. When the October offering failed to sell as planned, California was forced to accept 8 percent less money than it needed and to pay as much as $123 million more in interest than the banks said was sufficient for the market. And the threesome made $12.4 million on the deal, contributing to record bonuses in the securities industry a year after getting a total of $80 billion in a federal bailout. “Just because someone earns a big wad of money doesn’t mean that they can do what they say they can do,” said Marilyn Cohen, who watched the sale unfold from Los Angeles as president of Envision Capital Management, which oversees $250 million in bonds for individuals. “And shame on the state if they were drinking that Kool-Aid.” The California sale helped send the municipal-bond market to its worst month in a year. It ended a rally that had pushed borrowing costs for cities and states to a 42-year low, as measured by the Bond Buyer’s index of 20-year general obligation bonds. bloomberg.com