Law and legal issues

Liquidity in the short-term market has dried up to the point where "there's pretty much a total lack" of banks willing to provide issuers with letters of credit or standby bond purchase facilities, the executive director of the Municipal Securities Rulemaking Board said yesterday.

LAS VEGAS - A California state Treasury official - facing the need to borrow $7 billion in the short-term markets this month - expressed optimism that the $700 billion bailout enacted Friday would get the markets working again.

A federal judge in Birmingham Friday scheduled a hearing on Nov. 17 in a lawsuit seeking the appointment of a receiver for Jefferson County, Ala.’s troubled sewer system, according to a report in the Birmingham News.

With the Aug. 7 announcement by the Maryland Insurance Administration regarding the restructuring of ACA Financial Guaranty, there are questions in the market about how it was designed, how it will work, and whether or not it should serve as an example for future restructurings.

WASHINGTON - The Brazos Higher Education Service Corp., one of the largest nonprofit student loan lenders in the country, may be the first to ask its institutional investors to voluntarily tender, at less than par, roughly $6 billion of outstanding taxable student-loan related auction-rate securities so that it can restructure them as term floating-rate notes.

Delayed progress of the federal government's market bailout continues to restrict state and local governments' abilities to raise money, Massachusetts Treasurer Timothy Cahill said yesterday.

A lawsuit filed by New Orleans alleging that "mismanagement" and "greed" at Ambac Assurance Corp. cost the city millions of dollars is nothing more than "a lot of sound and fury," the insurer said in a motion seeking dismissal of the case earlier this week.

BRADENTON, Fla. - Jefferson County commissioners yesterday voted 3 to 2 to approve a seven-day extension of its forbearance agreements with banks and swap counterparties at the request of Alabama Gov. Bob Riley.

WASHINGTON - Morgan Stanley announced Monday it will refinance illiquid auction-rate preferred shares with tender options bonds, created from municipal securities in 10 of its closed-end municipal funds, to escape high interest rates and provide liquidity to its auction-rate securities investors.

CHICAGO - Five southeastern Wisconsin school districts this week filed a lawsuit against Stifel Nicolaus & Co. and the Royal Bank of Canada, alleging that the firms fraudulently misrepresented the safety of an investment transaction involving synthetic collateralized debt obligations, resulting in about $150 million in losses.

Stephen R. Moynahan has been barred from acting as a supervisor at a broker-dealer firm, suspended from the dealer community for six months, and ordered to pay $140,000 under a settlement of Securities and Exchange Commission charges that he failed to supervise Robert J. Bradbury, the former head of Dolphin & Bradbury Inc., who allegedly defrauded Pennsylvania school districts.

BRADENTON, Fla. - As Jefferson County, Ala., commissioners meet today to consider a seven-day extension of their sewer and general obligation forbearance agreements, officials face a protracted and expensive legal battle in federal court as creditors seek proposals from potential receivers to run the financially troubled system, according to a legal expert.

Ronald A. Stack, managing director and head of finance at Barclays Capital in New York, became chairman of the Municipal Securities Rulemaking Board yesterday, less than two weeks after his former firm, Lehman Brothers Inc., filed for bankruptcy protection.

WASHINGTON - Lawmakers are considering extending the Treasury Department's federal guaranty program for money market mutual funds, suspending fair value accounting, and raising the deposit insurance limit at banks, in an effort to convince at least 12 members to change their votes on legislation designed to calm the financial markets.

BRADENTON, Fla. - Tax increment financing in Florida is back in limbo again.

The primary municipal bond market may have ground to a virtual halt, but yesterday marked the startup of the New Issue Information Dissemination System, which is designed to improve the accuracy and timeliness of information about new municipal securities issues that is disseminated to market participants.

BRADENTON, Fla. - As Jefferson County, Ala., was poised to default on its debt payments yesterday, a federal judge set a hearing for Friday in the lawsuit seeking to have a receiver appointed for the county's financially troubled sewer system.

WASHINGTON - The House yesterday rejected the Bush administration's $700 billion bailout package by a vote 228 to 205, stunning proponents of the measure and triggering huge losses in the markets after the Treasury earlier in the day detailed and opened its $50 billion temporary federal guaranty program for money market funds.

BRADENTON, Fla. - Jefferson County, Ala., faces expiration of its latest forbearance agreements today and may default on some of its $3.2 billion of troubled sewer debt, most of which is in variable- and auction-rate securities.

WASHINGTON - Raymond James Financial Inc. confirmed Thursday that it will apply for bank holding company status, following the course taken last week by the larger investment banks, Goldman Sachs Group Inc. and Morgan Stanley.