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Thursday, June 2, 2016

The Municipal Bond Market is a Massive Criminal Enterprise: Get Out Now or Pay Later


Richard Lawless

Senior Citizens and Savers throughout the fifty states and Puerto Rico have
taken tens of billions in municipal bond losses. It has become clear that the
Rating Agencies have been knowingly and intentionally issuing good credit
ratings for technically bankrupt municipal entities in exchange for healthy

The Puerto Rico financial collapse was one of the first events to shine on a
light on this widespread activity. The Puerto Rico Government issued a 23-
page report that included sworn testimony from municipal executives that the
Rating Agencies knew they couldn’t repay the debt but for a higher fee, they
would issue good credit ratings. To date, the fraudulent credit ratings have al-
ready generated $30 billion dollars in losses across the fifty states. The Rating
Agencies get wealthy and America’s Seniors and Savers are paying the price.

I contacted the three General Counsels for Moody’s, S&P and Fitch. Fitch de-
nied the allegations and Moody’s and S&P failed to respond. I contacted the
Board of Directors for all three ratings agencies and forwarded the testimony
and financial audits supporting this practice.  No Board Member has respon-
ded. The Agencies engaged in this practice, contributing to the 2007-2008 fin-
ancial meltdown that cost Americans trillions and were never held accountable.
There is good reason for the Rating Agencies confidence that they will once a-
gain walk away scot free.  It is clear that Congress is much more willing to th-
row America’s Seniors under the bus then they are to bite the hand that feeds

Although all 50 States have residents that took material losses, New York was
the highest with over $2,000,000,000 followed by Florida, New Jersey, Penn-
sylvania, Illinois and California. All of States Attorney General’s know about
this activity but none have moved to protect their residents.  They are not alo-
ne, this activity was reported to the FBI, SEC and U.S. Attorney’s office. They
all expressed deep concern and they have all failed to take any meaningful ac-

Given the indifference by our Political Leaders, Law Enforcement and our Ju-
dicial System, I strongly recommend that Seniors and Savers divest themselves
of all municipal bond investments.  It is only a matter of time for Chicago and
California, and it is clear there will be no protection from the massive losses.

Richard Lawless is a former senior banker who has specialized in evaluating and granting 
debt for over 25 years. He has a Master’s Degree in Finance from the University of San Diego 
and Bachelor’s Degree from Pepperdine University. He sits on a number of Corporate Boards 
and actively writes for a number of finance publications. The opinions expressed in the pre-
ceding commentary are solely those of the author and do not necessarily reflect those of The
Puerto Rico Monitor, its editors, contributors or advertisers.

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