Law and legal issues

SANTA ANA PUEBLO, N.M. — Two senators plan to introduce legislation as soon as today to permanently extend a popular provision in last year’s stimulus law that was designed to encourage banks to buy municipal debt from small issuers but would expire at the end of the year without congressional action.

SANTA ANA PUEBLO, N.M. — The National Federation of Municipal Analysts presented awards to the Municipal Securities Rulemaking Board and five individuals last week, including Wisconsin state capital finance director Frank Hoadley and B.C. Ziegler & Co. director of research Ed Merrigan, during its annual conference here.

WASHINGTON — The Financial Industry Regulatory Authority is preparing to take enforcement action against certain firms for selling municipal bonds to retail customers without disclosing material information, including that the bonds’ credit ratings had been spiraling downward, a FINRA official said Thursday.

Pennsylvania officials yesterday weighed in on an initiative to prohibit local governments from using derivatives, with most participants in the public hearing urging greater state regulation and guidelines for such instruments rather than ending swaps at the local level.

CHICAGO — The Minnesota Supreme Court ruled yesterday that Gov. Tim Pawlenty exceeded his executive powers in using his unallotment authority to slash the fiscal 2010-11 budget sent to him by lawmakers last year, a finding that raises questions over the legality of $2.7 billion in spending cuts made by the governor.

WASHINGTON — Utilities and energy companies are urging federal lawmakers to remove a provision of the financial regulatory reform bill that would impose a fiduciary duty on swap dealers engaging in transactions with state and local governments and require them to put the governments’ interest before their own.

In what could be a first of it’s kind action in the municipal bond market, the Internal Revenue Service has suspended tax-exempt bond attorney Michael W. McCall for at least 24 months from practicing before it for writing a false tax opinion.

Airport executives are accusing airlines of being hypocritical, claiming they are arguing against airports increasing passenger facility charges while collecting increased revenue from fees for baggage and other amenities.

BRADENTON, Fla. — Syncora Guarantee Inc. has filed a civil suit alleging that Jefferson County, Ala., and JPMorgan “fraudulently induced” it to provide more than $1 billion in insurance coverage for the county’s nearly $3.2 billion of variable- and auction-rate sewer warrants.

ALAMEDA, Calif. — A Superior Court judge in California Tuesday upheld the state government’s shift of $2.05 billion away from local redevelopment agencies to help balance the budget.

Indiana’s Securities Division last week reached an agreement on the last of several lawsuits it filed against investment banks in connection with failed auction-rate securities.

WASHINGTON — The Municipal Securities Rulemaking Board plans to propose easing draft rule changes so dealers would only have to disclose the political action committees controlled by bank-related and other affiliates and not the amounts of political contributions the PACs make to issuer officials, or the names of those who receive them.

The treasurer of California, the largest municipal bond issuer in the nation, is urging federal lawmakers to amend the pending financial regulatory reform bill to require buyers of municipal credit default swaps to have actual exposure to the issuer’s underlying securities.

WASHINGTON — Rep. Jim McDermott, D-Wash., soon plans to introduce legislation that would remove the cap on clean renewable energy bonds, following the transition of CREBs to a direct-pay system where issuers receive a 70% subsidy from the federal government to help with interest paid to bond holders.

The New York Supreme Court late Thursday denied Bank of America Corp. and Countrywide Financial Corp.’s motion to dismiss MBIA Insurance Corp.’s claims of fraud by Countrywide.

WASHINGTON — As the full Senate began to debate financial regulatory reform legislation Thursday, dealers pushed back against several provisions they said could shut down the swaps market for states and localities.

While local governments face cuts in state aid, declining revenue, and sometimes hefty retirement-benefit obligations, the market should not anticipate a boost in municipal bankruptcy filings, several muni-market professionals said Thursday during a SIFMA conference.

WASHINGTON — A federal judge in Manhattan has ruled that a group of 11 California localities, including Los Angeles, may go forward with their civil cases against Goldman, Sachs & Co., Citigroup, and several other high-profile firms because they may have participated in an alleged conspiracy to rig bids for municipal investment contracts and derivatives.

WASHINGTON — At a meeting today and tomorrow in Philadelphia, the Municipal Securities Rulemaking Board plans to discuss proposed rule changes that would dictate the priority of retail and other customer orders in primary offerings, as well as where the board stands on its push to provide rating changes over its EMMA site.

BRADENTON, Fla. — Miami’s former budget director, Michael Boudreaux, on Monday filed a whistleblower lawsuit claiming he was fired for “telling the truth and reporting about malfeasance” by former and current city hall officials.