Law and legal issues

The financial meltdown in Jefferson County worsened this week with offices in Alabama’s largest county figuring out how to operate without sufficient staff and local lawmakers still disagreeing over how to fix the problem.

By cutting Ambac Assurance Corp.'s financial strength rating to junk this week, Standard & Poor's put almost 26,000 municipal bonds into credit limbo.

SAN FRANCISCO - As California Gov. Arnold Schwarzenegger yesterday signed a series of budget revisions to address the state's deficit and cash-flow troubles, the controller's office continued printing IOUs to pay many of the state's bills.

SAN FRANCISCO - California redevelopment agencies plan to sue to block a $2.05 billion revenue grab that state lawmakers approved Friday as part of a $23.1 billion budget-balancing deal.

WASHINGTON - Market participants have been quick to criticize a bill proposed by Rep. John B. Larson, D-Conn., that would tax municipal and other over-the-counter derivatives, saying that the legislation could freeze the derivatives market by creating prohibitively high costs for such contracts.

WASHINGTON - The Municipal Securities Rulemaking Board has elected Peter Clarke, managing director at JPMorgan in New York, to replace Ronald Stack as its chairman, beginning Oct 1.

California lawmakers passed $23.1 billion of budget balancing measures Friday, closing most of the state's estimated $24.2 billion budget deficit for this year.

SAN FRANCISCO – California Gov. Arnold Schwarzenegger late Friday said he plans to sign a budget proposal passed by the State Legislature Friday afternoon.

The three men indicted in a Jefferson County sewer bond pay-to-play criminal case are seeking a second delay in their trial date because the case is complex and they haven’t had time to sift through all the discovery evidence, they said in a joint motion last week.

WASHINGTON - The Securities and Exchange Commission voted unanimously yesterday to repropose pay-to-play restrictions on investment advisers for states and localities, modeled partly on limits already in place for municipal broker-dealers.

WASHINGTON - Rep. Bob Etheridge, D-N.C., today will urge Treasury Secretary Timothy Geithner to quickly issue guidance on qualified school construction bonds, specifically how to strip and sell the bonds' tax credit in the secondary market.

BRADENTON, Fla. - A South Carolina Supreme Court ruling striking down a referendum requirement will make it easier and less costly for cities and towns to sell their old, leaky water and sewer systems to counties that can make improvements, benefiting economic development prospects and the environment.

WASHINGTON - The Municipal Securities Rulemaking Board this week will discuss how to proceed with draft rule changes it proposed in May to address an issue that surfaced when Lehman Brothers filed for bankruptcy last year and profits were withheld from syndicate members in muni transactions senior managed by the firm.

SAN FRANCISCO - California Gov. Arnold Schwarzenegger and legislative leaders late Monday agreed to close the state's $26.3 billion budget deficit with a combination of spending cuts, local government funds, and accounting gimmicks that drew protests from across the state.

CHICAGO - Detroit late last month closed on amended swap agreements tied to its pension obligation certificates, ending a six-month headache that began in January when a downgrade triggered a swap termination event with an estimated $400 million price tag.

WASHINGTON - The Treasury Department yesterday sent Congress draft legislation designed to strengthen federal oversight of credit rating agencies, mitigate conflicts of interest, increase the transparency of the ratings process and reduce investor reliance on ratings.

The Securities and Exchange Commission yesterday filed securities fraud charges against Memphis-based Morgan Keegan & Co. for misleading thousands of investors about the liquidity risks associated with auction-rate securities, while Alabama regulators took initial steps to ban the firm from doing business in the state.

BRADENTON, Fla. - Economic, political, and legal challenges prevented special masters from reaching a successful conclusion in Jefferson County, Ala.'s federal sewer receivership case, the masters said in a report late Friday.

WASHINGTON - Bond lawyers are concerned about the Securities and Exchange Commission's proposal to require issuers to disclose when they have received an Internal Revenue Service form that asks an issuer or borrower to help it resolve tax issues related to their bonds.

The Investment Company Institute is urging Congress to give the Securities and Exchange Commission expanded authority over the municipal securities market so it can take steps to ensure investors have timely access to key information about muni offerings.