January 9, 2009

Feds investigating massive fraud in municipal bond market

The NY Times has an article today about fraud in the municipal bond market around the country. Wisconsin or Racine aren't mentioned in the story, but the piece raises questions about how local governments (cities, villages, towns, school boards, etc.) borrow money. We're checking with local leaders on potential local impacts.

The fraud involves price-fixing among financial institutions that are supposed to be competitively bidding for municipal loans. According to the article, institutions decided in advance who would win the bid and the others would submit intentionally higher bids to assure the winner. The article estimates it cost local governments $4 billion a year.

Several school boards and communities around the country have sued financial institutions for fraud, according to the NY Times. If anyone out there has insight on whether Racine is, or is not, involved in this, please get in touch.

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