Bankruptcy

WASHINGTON - Treasury Department and Federal Reserve officials are considering a plan to provide federal guarantees or other assistance to short-term cash-flow notes issued by state and local governments, congressional and other sources said yesterday.

SAN FRANCISCO - A troubled rural school district in California is poised to fall under state control as the result of its financial woes, and more districts may join it, according to a state education official.

Missouri Secretary of State Robin Carnahan announced on Thursday that the state has reached a finalized auction-rate securities settlement with two Bank of America subsidiaries and is continuing an investigation of ARS sales practices at Stifel Nicolaus & Co.

WASHINGTON - The National League of Cities is seeking $5 billion in seed money from the Treasury Department to establish an issuer-run mutual bond insurance company, according to a draft business plan NLC plans to release today.

DALLAS - A central Texas municipal utility district that has been in default for years is seeking to reorganize under Chapter 9 bankruptcy.

BRADENTON, Fla. - A Kentucky lawmaker said he will raise questions today about whether a lease transaction to finance the purchase of a hospital exposed a flagship state university to risks posed by an underlying swap and letter of credit.

WASHINGTON - The Securities and Exchange Commission yesterday fined Jersey City, N.J.-based Wolfe & Hurst Bond Brokers and a former broker $25,000 each and barred the broker from the securities industry for at least one year for manipulating bids-wanted auctions for municipal bonds.

New York City Comptroller William Thompson is urging Securities and Exchange Commission chairman Mary Schapiro to implement a comprehensive ban on political contributions from investment advisers who are compensated for providing services to public pension funds.

The Municipal Securities Rulemaking Board has drafted rule changes to address an issue that surfaced when Lehman Brothers filed for bankruptcy last year and profits were withheld from syndicate members in municipal bond transactions senior managed by that firm.

SAN FRANCISCO - Standard & Poor's rated Half Moon Bay, Calif.'s judgment obligation bond issue AA-minus, saying strong financial management and high wealth levels offset the weight of a looming settlement payment.

WASHINGTON - Medicare and Social Security trust funds will run out of money in 2017 and 2037, respectively - two to four years earlier than previously projected - because of the recession, trustees concluded in annual reports sent to Congress.

President Obama's budget proposes to hike the marginal tax rates of the wealthy to 36% and 39.6% beginning in fiscal 2011, and to increase by 5% the capital gains and dividends tax rate for the wealthy - tax changes that market participants say could lead to higher demand for tax-exempt bonds.

The Municipal Securities Rulemaking Board's proposed access-equals-delivery system would require dealers to "undertake an enormous amount of expense" to accommodate customers' standing requests for paper copies of primary offering documents, the Securities Industry and Financial Markets Association is warning.

WASHINGTON - Securities and Exchange Commission chairman Mary Schapiro said Friday that she favors the creation of a council of existing regulators to oversee risk in the financial markets, rather than granting that authority to a single regulator.

BRADENTON, Fla. - Jefferson County, Ala., commissioner Jim Carns Friday said he was "extraordinarily encouraged" that the Securities and Exchange Commission had approved enforcement action against JPMorgan for securities law violations involving the county's bond and swaps sales.

DALLAS - The $144 million of outstanding bonds for Glendale, Ariz.'s National Hockey League arena should withstand the loss of the Phoenix Coyotes in the short term, but the vacancy will add pressure to the city's finances, Moody's Investors Service analysts said.

A federal judge in New York City has dismissed most of the class action claims filed last year by five municipal issuers that alleged Wall Street and other firms engaged in a secret, anticompetitive price-fixing conspiracy of municipal derivatives and guaranteed investment contracts.

SAN FRANCISCO - Half Moon Bay, Calif., may sell judgment obligation bonds to pay off a debt to a developer that has caused speculation that the city could be forced to declare bankruptcy.

SAN FRANCISCO — Municipal bankruptcy rumors have swept California since the city of Vallejo sought Chapter 9 protection from creditors last year.

BRADENTON, Fla. — Lawmakers representing Jefferson County refused to allow the full Alabama Legislature to debate a bill that would have helped the county restructure nearly $3.2 billion of troubled sewer debt. The bill allowing for a diversion of sales tax revenue was seen as the county’s best hope for avoiding what would be the nation’s largest ever municipal bankruptcy.