Banks Look to Profit on Muni-Bond Fears

The Wall Street Journal reports:

Some of the world's biggest banks are lining up to profit from worries about the declining finances of U.S. cities and states.

For the first time in two years, Switzerland's UBS AG has begun making markets in derivatives tied to municipal bonds and other securities. The credit-default swaps obligate swap sellers to compensate buyers if a municipal issuer misses an interest payment or restructures its debt.

If they are wrong: the Fed will bailout them out.