Do you see what happens Larry when you sell CDS on California? You get a Greek-style scapegoating campaign. Cali's State Treasurer Bill Lockyer, exasperated at his impotence to sell $2 billion in GO bonds, has resorted to the last option: sending angry missives and trying to make a media circus out of it. It is now all Goldman's fault that California is bankrupt, just because it dares to make a market in Cali CDS. Ring a bell? It worked miracles for Greece, whose bonds are now tumbling a day after everyone said Greek issues were resolved. Also, we can't wait to uncover, just like in the Greek case, that the biggest buyer of Cali CDS is PIMCO, CalPERS, TCW, Western, Oaktree, or some other California-based fund. Now that would be even funnier than Cali considered a more worthless "asset" than Kazakhstan. At least their potassium deposits are best in region.
Dear Mr. Blankfein:
I write to request information about your firm's market activities related to credit default swaps on municipal bonds in general, and State of California general obligation (GO) bonds specifically.
The State never has defaulted on a debt service payment in its history. Small wonder.
Credit default swaps (CDS) amount to insurance against default. Yet, despite the security-plus backing of California GOs, and our spotless record of paying our debt on time and in full, market participants actively buy and sell credit default swaps (CDS) on our bonds. In fact, my office has information that indicates CDS on the State's GO bonds may rank No.1 in dollar value among all municipal issuers. We also have information that indicates your firm, which sells California GO bonds, may participate in the municipal CDS market.
Data reported in the news media and other sources show that the prices, or spreads, on California CDS wrongly brand our bonds as a greater risk than those issued by such nations as Kazakhstan, Croatia, Bulgaria and Thailand. The perception of risk could adversely affect the price of our bonds when we go to market. That makes the CDS market important to our taxpayers. That is why I want to fully understand the municipal CDS market in general, the market for California CDS, and [Goldman's] role in these markets.
[and much more ridiculousness]
*With apologies to In-N-Out purists. What Lockyer should do, instead of following G-Pap retarded startegy of scapegoating and focusing on what is completely irrelevant even as his state burns, is nationalize the hamburger chain and IPO it (using Goldman of course). That would immediately resolve all budget problems the state has through the year 3000.