Conduits are first on the FCC agenda. It is becoming too popular for companies in need of financing to raise capital through government munis. So far, they were targeted by the IRS for the revenue lost. Interest payments are paid by the company, and the government gets fees and projected economic growth.With lower standards for filing, corporations access to capital at lower rates that they would have on their own.
Governments don't carry the liability on the issue, but the munis carry the government's brand. It works for municipalities in good financial standing, but look for the ones who are sliding under the radar, and a good opportunity for speculation arises. 35% of munis in default were conduits.
Another tick:
Credit default swaps. Even though the brains of Long Term Capital Management were crowned the kings of M&A hedging, the credit default swaps are said to be a nicer arena for speculation. When rumors of take over start, prices of the other targets get bidden higher. But depending on the debt involved in the takeover, a higher payout happens in the credit default swaps. Credit default instruments go up in price at a higher payout than the actual stock price without the risk of the stock collapsing right after the take over because debt stays in the books for good.
