Bankruptcy

WASHINGTON - State tax collections for the fourth quarter of 2008 declined for the first time in more than six years, and sales taxes were dealt a record-setting blow during that period, according to a report issued yesterday by the Nelson A. Rockefeller Institute of Government.

CHICAGO - Former Illinois Gov. Rod Blagojevich pleaded not guilty yesterday to federal corruption charges alleging his drive for financial gain influenced state legislation, jobs, and contracts - including the selection of Bear, Stearns & Co. to lead the state's $10 billion pension bond sale in 2003.

WASHINGTON - Two lawsuits in federal courts seeking class action status that claim it's illegal for tolling authorities in Rhode Island and Massachusetts to discount tolls for certain residents and not others could spell trouble for toll-backed muni bonds and potentially affect issuers in other states, some market participants said.

CHICAGO - A lawsuit filed by five southeastern Wisconsin school districts against several financial firms the districts charge misled them over the safety of a $200 million investment involving synthetic collateralized debt obligations will be heard at the state court level, a federal judge has ruled.

SAN FRANCISCO - Standard & Poor's suspended its credit ratings on three Victorville, Calif., agencies after the Southern California city failed to garner unqualified audit opinions for its just-completed 2007 financial reports.

WASHINGTON - Standard & Poor's is defending the practice of municipal bond and other issuers paying for their own ratings, arguing in a white paper released ahead of tomorrow's Securities and Exchange Commission roundtable on rating agencies that "issuer-pays" is the most effective business model for fostering high-quality ratings and a transparent ratings process.

The Financial Industry Regulatory Authority censured and fined Edward D. Jones & Co. $900,000 - the largest fine of its kind - for failing to deliver official statements to its customers in a timely manner, as well as for violating supervisory and record-keeping rules of the Municipal Securities Rulemaking Board.

Congress is now hard at work on what some believe will be a fundamental restructuring of the framework for financial market regulation. New Securities and Exchange Commission chairman Mary Schapiro, former SEC chairs Arthur Levitt and Richard Breeden, the leaders of the Municipal Securities Rulemaking Board , FINRA, leading experts in securities law, and various interest groups have all testified recently as to changes they believe are needed, including in some instances greater regulation of the municipal bond market.

CHICAGO - Illinois received nine bids on its $150 million competitive sale of general obligation bonds Tuesday, faring better in the level of interest from broker-dealers and yields than state officials had expected after a string of bad credit news.

WASHINGTON - In an effort to boost disclosures for non-pension, health care, and other post-employment benefits, the National Federation of Municipal Analysts is urging issuers to release as much supplemental information in annual financial statements and bond offering documents as necessary "to effectively explain and communicate" their specific OPEB situation and funding approach.

The National Governors Association, key lawmakers, and a group representing state housing finance agencies are all urging the federal government to help provide liquidity for housing bonds, arguing the HFAs could issue $9.7 billion to $15 billion of debt this year if they had federal assistance.

The ratings eligibility criteria for the Federal Reserve's $1 trillion Term Asset-Backed Securities Loan Facility unduly favors the three "major" credit rating agencies whose mistakes helped fueled the financial crisis, Connecticut Attorney General Richard Blumenthal complained in a letter sent yesterday to Fed chairman Ben Bernanke.

WASHINGTON - The Municipal Securities Rulemaking Board will not amend its Rule G-37 to restrict dealer contributions to bond ballot campaign initiatives because there is not enough evidence to show firms are being awarded bond business after helping to fund the initiatives. The decision left some market participants scratching their heads.

SAN FRANCISCO - The Nevada Supreme Court is scheduled to hear oral arguments this afternoon on a case that could severely limit redevelopment agencies if the plaintiffs are successful.

WASHINGTON - The stresses in the short-term municipal market, fueled in part by a mismatch in supply and demand for liquidity facilities, may reflect that variable-rate demand notes are not a viable financing mechanism for states and localities going forward, Federal Reserve chairman Ben Bernanke warned lawmakers last week, surprising some market participants.

SAN FRANCISCO - The U.S. Ninth Circuit Bankruptcy Appellate Panel late Thursday ordered Vallejo, Calif., to show that the $136 million in restricted funds on its balance sheet are legally restricted, as the panel considers a labor union appeal of the city's bankruptcy eligibility.

WASHINGTON - South Carolina Gov. Mark Sanford became the last governor in the nation to certify his acceptance of federal stimulus funds before the deadline Friday, but said he will not request $700 million of the funds until the legislature agrees to use the funds to pay down debt.

CHICAGO - After months of negotiations, Detroit has reached a settlement with two counterparties that allows it to avoid swap termination payments of up to $400 million tied to downgrades of the city's debt.

Supporters of the Federal Family Education Loan program are maneuvering to save it as Congress moves forward with budget resolutions that would set spending goals based on President Obama's proposed fiscal 2010 budget, which calls for FFEL's elimination.

BRADENTON, Fla. - Saying economic reality forced a major change in what would be the largest land purchase in Florida's history, Gov. Charlie Crist yesterday announced yet another scaled-back approach to buying land owned by U.S. Sugar Corp. to restore the Everglades.