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Pension Shell Games Threaten Market: Arthur Levitt, Lynn Turner

The municipal bond market, once a quiet corner of Wall Street, is slowly becoming a scene of scandal and regulatory inquest. The Securities and Exchange Commission recently accused New Jersey of giving fraudulent information about its finances to municipal bond investors. The SEC is investigating officials in Miami for similar problems.

The rate of municipal bond defaults -- roughly $3 billion per year -- is triple the usual pace, and analysts say many more bonds are on the brink thanks to the weak economy and low tax collections.