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.
