Law and legal issues

WASHINGTON – The Treasury Department announced Sunday night that tax-exempt money market mutual funds will be included under its temporary $50 billion insurance program for money market funds that it unveiled Friday, providing urgently-sought relief to market participants.

CHICAGO - The market for variable-rate demand obligations was calmer Friday after experiencing one of its rockiest weeks in recent memory, with weekly and daily remarketings failing for some outstanding issues and interest rates skyrocketing for others.

Ambac Financial Group Inc. said Friday night it will postpone its planned $850 million recapitalization of subsidiary Connie Lee Insurance Co. following Moody's Investors Service decision Thursday to place the Aa3 rating of Ambac Assurance Corp. on review for possible downgrade.

BRADENTON, Fla. - The Jefferson County commission was set to hold a special meeting this morning to approve a forbearance agreement and response to the lawsuit filed last week seeking a receiver for the Alabama county's troubled sewer system.

BRADENTON, Fla. - The Florida Supreme Court yesterday reversed itself and said it is constitutional for tax increment financing bonds to be issued without first holding a public referendum, upholding decades of case law on the issue in the state.

WASHINGTON - Questions over whether inflated land values were used by New York City in its pursuit of tax-exempt bonds for the new Yankee Stadium could imperil the bonds' tax-exempt status, witnesses suggested at a hearing here yesterday. But the agency that issued the bonds said the city used standard procedures in its assessments and attributed the differences to different assumptions used in relation to different purposes for the assessments.

CHICAGO - Municipal issuers must file material event notices when the ratings on their bonds are downgraded, even if credit rating agencies don't formally notify them that their bonds' ratings have changed, a Securities and Exchange Commission enforcement attorney said yesterday.

House Financial Services Committee chairman Barney Frank, D-Mass., called for new rules to curb abuses in the auction-rate securities market at a hearing yesterday, as federal and state regulators indicated the ARS market is virtually dead and would require major structural changes to regain liquidity.

CHICAGO - As the municipal market grapples with the largest reordering of the financial markets in history, the National Association of Bond Lawyers plans to work closely with its members in the coming days to help sort out the numerous unanswered questions facing their clients, William Holby, who took over as NABL's new president last night, said in an interview this week.

BRADENTON, Fla. - After more than seven months of negotiations, Jefferson County's major bond insurers and the trustee for bondholders have filed a lawsuit asking a judge to appoint a receiver for the Alabama county's sewer system, which is saddled with $3.2 billion of troubled debt and $5.2 billion of swaps.

CHICAGO - Professionals in Lehman Brothers' North American investment banking and capital markets operations returned to their jobs yesterday amid the more positive news that British banking giant Barclays PLC will acquire their business from Lehman's bankrupt holding company for $1.75 billion.

CHICAGO - Investor confidence in municipal securities may have been shattered by the "liquidity freeze-up" in the auction-rate securities market earlier this year, as well as the contemporaneous downgrades to most bond insurers that caused the value of insured bonds to plummet, the Securities and Exchange Commission's municipal securities chief Martha Mahan Haines warned bond attorneys gathered here yesterday.

WASHINGTON - Municipal issuers holding swap contracts and hundreds of millions worth of guaranteed-investment contracts with American International Group Inc. are safe and not likely to loose their investments, sources said yesterday, while other municipalities worried what would happen to AIG's large muni holdings.

WASHINGTON - The House Financial Services Committee has canceled a municipal securities disclosure hearing that had been set for Tuesday, joining its counterpart committee in the Senate by scheduling hearings on the financial market crisis for that day.

The largest insurers of Jefferson County, Ala.’s troubled $3.2 billion sewer debt along with the county’s trustee yesterday filed suit against the county and the County Commission seeking the appointment of a receiver for the sewer system.

Credit Suisse Securities LLC reached an agreement in principle with state securities regulators to buy back at par $550 million of auction-rate securities from retail investors and pay a $15 million fine to the states.

In what appears to be the first enforcement case in recent years involving the Municipal Securities Rulemaking Board's controversial Rule G-23, the Financial Industry Regulatory Authority has imposed a $10,000 fine on the former A. G. Edwards & Sons Inc. in St. Louis for failing to disclose to customers who purchased muni bonds from four deals it underwrote that it had been the financial adviser for the deals.

The collapse of Lehman Brothers and buyout of Merrill Lynch & Co. by Bank of America over the weekend sent shudders through New York's economy yesterday as issuers evaluated what it meant for them.

In response to Lehman Brothers Holdings Inc. bankruptcy filing Monday, Massachusetts replaced the underwriter with two other investment banks on an $850 million transaction to refinance variable-rate bonds into fixed-rate debt.

The Federal Reserve took action Sunday to provide additional liquidity for markets and expand the types of assets that broker-dealers can exchange for Treasury securities through its Term Securities Lending Facility - assets that now include municipal bonds.