Friday, March 21, 2008

When Will People Learn

Repeat after me: My broker is not looking out for my best interests. My banker is not looking out for my best interests. Repeat this as long as it takes to never forget it.

March 20 (Bloomberg) -- How can any state or municipality possibly use swaps and derivatives again?

No, I'm not referring to how such things blew up on Jefferson County, Alabama, which is trying to extricate itself from $3 billion in variable-rate debt and $5.4 billion in swaps. I'm not even talking about how so many other municipalities are finding that the financial stuff they bought is costing them money instead of saving it.

I instead refer to two class-action complaints filed on March 12 by seven municipalities, including Fairfax County, Virginia, the city of Chicago and the state of Mississippi, one against Bank of America Corp. and another against 35 securities firms for bid-rigging in municipal derivatives.

Get this: The issuers are already working on a settlement with Bank of America.

The lender copped a plea and is ratting everyone out. In February 2007, the bank announced it was cooperating with the federal government in its investigation into anticompetitive practices in the municipal bond industry.

The bank at the time also said it had entered into a ``leniency agreement'' with the Justice Department. This means that Justice won't bring criminal prosecutions against the bank for its role in the scandal surrounding the reinvestment-of- proceeds business.


Bankers and brokers are looking out for themselves and you should too. Or hire a fiduciary to do it for you. But never, ever just take their word for it that they are doing what is best for you. They aren't now, never have and never will.

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