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Taxation

Sequestration Would Cut BAB Payments By $255 Million

Major cuts in federal payments to issuers of Build America Bonds and other direct-pay bonds will have to be made if Congress is forced to make $1.2 trillion of across-the-board cuts to the fiscal 2013 budget under the congressionally-mandated sequestration process, according to a report the Office of Management and...

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Comments (2)
We were wise enough to evaluate every issue we purchased to be sure the issuer could stand on their own to make debt payments even if the BAB subsidies were cut to zero. All clients were told point blank that there was nothing stating the existance of an irrevocable guarantee; frankly, I was more concerned about administrative changes at the time. Moral of the story: read all documents thoroughly.

Mary Talbutt-Glassberg
Davidson Trust Co.
Posted by davidsontrust | Monday, September 17 2012 at 8:37AM ET
At the time, I told my clients, tongue in cheek, that the subsidy payments were guaranteed, just like the cash for clunkers payments to car dealerships, which came before the bond subsidy programs and didn't always go out on time or at all and, reportedly, did some heavy damage to participants. I thought I was being funny while at the same time gently warning that the federal guarantee isn't exactly what it used to be. I was wrong about the funny part.

John Payne
Bradley Payne LLC, Ohio
Posted by bradp2 | Friday, September 14 2012 at 5:36PM ET
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