Chronology of Coverage

Oct. 7, 2014

Op-Ed article by Prof Jim Estes warns a number of states have misused payments from tobacco companies that were meant for public health education following 1998 settlement; says states have instead used windfall for various unrelated expenditures, rather than tobacco prevention, as intended; notes many have mortgaged future payments through poorly-structured bond deals that will leave them heavily in debt. MORE

Jun. 20, 2014

Mary Jo White said on Friday that she had asked the S.E.C. to enhance transparency in a sector of Wall Street where middlemen may now have an advantage over investors. MORE

Municipal bonds have been depressed, but their tax-free status is likely to become even more appealing in 2014, as new tax rules go into effect; munis are seen as especially good for well-off people past 70 1/2, who are required to take minimum distributions from their retirement plans. MORE

Gretchen Morgenson Fair Game column contends that as cities like Detroit and states like Illinois face shortfalls, there is a need for more disclosure, not less, about pension funds; points out investors say better disclosure practices among tax-exempt issuers are slow in coming. MORE

Securities and Exchange Commission accuses special facilities district in Wenatchee, Wash, of misleading investors about an ice-rink project’s viability, and fines district $20,000; penalty is strong signal that SEC is serious about clamping down on misbehavior by municipal bond issuers. MORE

Detroit’s bankruptcy and concerns of Puerto Rico’s debt load have brought some added turmoil to the muni bond market; most municipal bond managers do not seem too concerned, however, as default rate is below 1 percent; say investors are missing opportunity created by recent sell-off, where outflows from funds have exceeded $45 billion since May. MORE

The Swiss banking giant, which manages $10 billion for the American commonwealth’s millionaires, began an internal investigation into the lending practices of some of its top-producing brokers. MORE

Two weeks after Detroit declared bankruptcy, cities, counties and other local governments in Michigan are getting a cold shoulder in the municipal bond market. MORE

The recent sell-off in bonds has hit hard in the municipal market, forcing governments to pay higher interest rates for crucial infrastructure projects. MORE

Floyd Norris High & Low Finance column analyzes resolution of municipal bond debt related to bankruptcy of Jefferson County, Ala, under which investors will lose 20 percent of their money on bonds that had been given AAA rating; argues that deal will likely become precedent for bankruptcy proceedings in other municipalities. MORE

Securities and Exchange Commission accuses Harrisburg, Pennsylvania’s debt-laden capital, of violating federal antifraud rules for securities issuers by repeatedly giving misleading information that created risks for bond investors as city’s finances were rapidly deteriorating. MORE

Representatives from California and two other states introduce bill that would strip states and cities of their right to issue tax-exempt bonds unless they first disclose true cost of their pension plans and whether they can pay it; measure seeks to prevent municipal bankruptcies like one in Stockton, Calif. MORE

Hundreds of school districts and community colleges across California have used capital appreciation bonds since 2007 to raise nearly $7 billion for construction projects; bonds allow schools to delay payment for years, or even decades, making future taxpayers liable for huge interest payments that can balloon to more than 10 times amount borrowed. MORE

Growing number of professional investors are betting that increase in bond investments over the past four years has gone too far, warning that perennially safe bond investments are due for drop in value as faith in government increases. MORE

Municipalities claim they will have to pay more to finance construction projects if Pres Obama’s plan to tax some interest on municipal bonds is approved. MORE

Puerto Rico is fighting to stay afloat in rising sea of debt as sputtering economy and shrinking population takes its toll, putting territory’s public pension funds at risk; officials, desperate to raise cash, are selling main San Juan airport and other public assets and are pitching territory as tax haven; some fear that growing debt is leading many investors to sell their municipal bonds and could trigger possible credit downgrade. MORE

Gretchen Morgenson Fair Game column says Hurricane Sandy is likely to weigh on local governments and authorities in the New York metropolitan area that are already struggling; contends in its wake, Congress could take steps to make it faster and less expensive for municipalities to borrow money. MORE

Gretchen Morgenson Fair Game column contends that the $4 trillion municipal bonds market is stuck in the Dark Ages; notes that regulators put muni issuers on notice in 2009 about disclosing basic financial information, but some do not seem to have gotten the message, and the regulators do not seem to care; relates the troubled history of issuer West Penn Allegheny Health System. MORE

Stockton, Calif, sold $125 million of bonds to try to close a shortfall in its pension plans for current and retired city workers, but the strategy backfired, leading to the city’s bankruptcy; underwriter Lehman Brothers understated the risks of the bonds; analysts say the same pitch that swayed Stockton has been made to thousands of local governments nationwide, and many of them were drawn into deals that have cost them dearly. MORE

Floyd Norris High & Low Finance column observes that school districts stymied by residents’ opposition to new taxes are finding creative ways to meet their responsibilities—often at extremely high costs to future generations; points out many districts are resorting to issuing capital appreciation bonds, in which principal and interest will not be paid for many years. MORE

Federal Reserve Bank of New York research finds that municipal bonds are widely seen as one of the safest investments, but this belief is based on records for a narrow slice of the market; finds much broader sample, which includes unrated bonds, had about 36 times as many municipal defaults over the past 40 years as conventional wisdom suggests. MORE

Dodd-Frank provision that would require municipal bond advisers to put residents’ interests first has been bogged down in a rule-making quagmire in Washington for nearly two years; House bill would eliminate the fiduciary mandate. MORE

Gretchen Morgenson Fair Game column contends that the Securities and Exchange Commission could be more active in guarding state and local agencies against the financial firms that underwrite their municipal bonds; holds that calls for greater oversight are welcome, particularly given how Wall Street has hornswoggled some muni issuers over the years, adding that muni investors and issuers have been burdened by opacity for too long. MORE

Securities and Exchange Commission calls for broad reforms of the municipal bond market, noting that some of the changes proposed would require an act of Congress; commission’s 165-page report devotes much of its focus on the relative lack of information available to investors about the municipal bonds they are buying; individual investors now hold 75 percent of the one million municipal bonds outstanding in the $3.7 trillion market. MORE

Three-trillion-dollar municipal bond market, concerned after the Libor scandel, is examining Thomson Reuters, the company that sets its rates, with little transparency; Thomson Reuters owns the Municipal Market Data index, which compiles and issues rates daily using a proprietary method. MORE

Phillip D Murphy, former executive at the Bank of America Corporation, is indicted in connection with a far-reaching conspiracy to defraud municipal bond investments through bid-rigging. MORE

San Bernardino, Calif, is the third city in the state to move toward bankruptcy in 2012, but investors in municipal debt show little sign of concern about California or any other state; analysts question how widespread the fiscal distress may prove to be, but are not predicting a wave of defaults. MORE

Surprised local taxpayers across the country are finding themselves obligated for parking garages, hockey arenas and other enterprises that can no longer pay their debts; officials have signed them up unknowingly to backstop the municipal bonds of independent authorities; practice, meant to save government money, is gaining popularity and creating problems for a small but growing number of cities. MORE

Moberly, Mo, which guaranteed bonds for a planned local Chinese-owned plant that failed, refuses to pay; investigations are pending, and analysts warn town’s failure to pay might tarnish the credit of other towns in Missouri. MORE

Gretchen Morgenson Fair Game column points out state and local governments looking to refinance their bonds are stuck in Wall Street swap deals with high interest rates; recalls that the swaps were supposed to save the public some money and concedes that, before the financial crash, they did; maintains that the cost of refinancing a derivatives-laced municipal bond can be enormous in the form of a termination fee, which borrowers are hesitant to negotiate. MORE

Federal regulators release new rules for the brokerage firms that help cities and states raise billions of dollars by issuing bonds every year; new regulations are intended to prevent debt disasters and rein in Wall Street practices that exploit smaller bond markets. MORE

Steady declines in smoking are creating problems for municipal bond investors; handful of bonds backed by yearly payments from tobacco companies under a landmark settlement in 1998 with 46 states are in the earliest stages of default, and more distress is expected; there are roughly $55 billion in outstanding tobacco bonds. MORE

Jefferson County, Ala, is drowning under $4 billion in debt, the result of a botched sewer project and corrupt business dealings; county officials are grappling with the implications of life under Chapter 9 of the federal bankruptcy code, a rarity for local governments; Chapter 9 bankruptcies involving large amounts of bond debt are so rare, that there is almost no legal precedent for what is happening in Jefferson County. MORE

Gretchen Morgenson Fair Game column applauds efforts by the Securities and Exchange Commission to bring transparency to the $4 trillion municipal bond market, but warns that while disclosure among issuers has improved, getting the full picture remains difficult; cites case of West Penn Allegheny Health System, an issuer that has not adapted well to the new, open world. MORE

Dec. 24, 2011

Era of thinking that municipal bonds were the safest thing after Treasuries might have ended with the bankruptcy filing of Jefferson County, Ala; filing sets up a fundamental test of what a government-backed full faith and credit pledge truly means. MORE

It pays for investors to carefully research issues involving municipal bonds in uncertain economic times, even considering that the widespread defaults predicted for 2011 never occurred; EMMA Web service helps navigate the issues. MORE

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