Muni Think

The Bond Dealers of America believes strongly in the health of the municipal bond market. The BDA is concerned about the detrimental effect on municipal finance of exaggerated statements about state and local fiscal problems. As the trade association representing securities dealers and banks active in the U.S. capital markets, the BDA believes it is important to set the record straight.

The BDA and its members will do everything we can to correct misperceptions and misstatements about the municipal market and to provide accurate information to the public about this critical financial sector.

The economic crisis is not over, but Congress is on the brink of allowing important bond programs to expire at the end of the year. That would be a terrible mistake.

Two years ago, I was on the phone with Tom, my regional underwriter, inquiring on the closing date of a standard bank-qualified general obligation school bond issue when I was informed that they could not find purchasers in the late 2008 market environment.

As California’s chief financial officers, we are writing to inform you that Orange County Treasurer-Tax Collector Chriss Street [in the Sept. 16 article “Analysts, Bankers and Buyers Remain Upbeat on Muni Credit”] appears to have a ­fundamental misunderstanding about the structure of priority payments under California law.

Caitlin Devitt and Yvette Shields’s Sept. 15 piece “Final Prairie State Deal Looms” tells only half the story behind the potential fiasco to the bond market and to ratepayers in the Midwest.

When President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law, he empowered — for the first time — an agency specifically responsible for looking out for the interests of state and local governments regarding their capital markets activity.

Tax-exempt municipal bonds have had a stellar record of safety against payment defaults, second only to U.S. Treasury bonds.

The dramatic changes in the municipal securities market leading toward a “new normal” are daunting. When significant changes are enumerated, even when one is aware of them, they are still surprising. Because the market environment is evolving rapidly, and market re-adjustments will continue well into the future, the “new normal” does not yet exist.

The Bond Buyer on Aug. 16 published a commentary of mine called “Pension 'Reform’ Plus Smart Lawyers May Help Save States” (the headline was chosen by The Bond Buyer). The main point of the commentary was that states, having attempted to balance their budgets over two to three rough fiscal years, had run out of the easier fixes, and would now turn more aggressively towards pensions as a potential source of budgetary savings.