Broke Town, U.S.A.

[Marcus Bryant]

http://www.nytimes.com/2011/03/06/magazine/06Muni-t.html

[boutons_deux]

Repugs killed the Build America bonds, with the transparent intention of bankrupting cities and counties (many of which were screwed by Wall St's municipal bond deals), and thereby wiping out all union contracts and pension plans.

[EVAY]

In the 1970's, New York City was about to go bankrupt and asked for a federal bailout. The New York (Post? Daily News? I forget which paper...it wasn't the Times) ran this huge front page headline: President Ford to New York: Drop Dead"

Years later I met some of the bond managers who had put together the debt recovery and they said that Wall Street could care less, and didn't believe that New York should have been saved. Since these were guys who lived and worked in NY (okay they lived in Long Island but worked in Manhattan) I was shocked. But then when Wall Street needed to be bailed out, I suspect they weren't so upset about the concept.

[EVAY]

From what I understand about the muni bond market, the issue is not quite as dire in the markets for munis as it is for the cities themselves. Apparently many of the bonds of a city like Detroit, for example, have been defeased and thus the investor is essentially safe. The city, however, may not be so lucky.

In other words, once again the Feds are protecting the money (muni bond) market, but whether or not they will bail out the cities is another issue.

[EVAY]

I know, I know, b-d, this is the kind of thing you have fussing about for ever so long.

[CosmicCowboy]

Well, thats why they are salable bonds. Every bond has to have a dedicated income stream that goes to pay off the bond. For instance...the Bonds that were issued to build the ATT Center...the .5 cent sales tax increase revenue stream was dedicated to paying off the bond. School bonds have to prove a property tax revenue stream dedicated to bond payment, etc.

[EVAY]

Well, thats why they are salable bonds. Every bond has to have a dedicated income stream that goes to pay off the bond. For instance...the Bonds that were issued to build the ATT Center...the .5 cent sales tax increase revenue stream was dedicated to paying off the bond. School bonds have to prove a property tax revenue stream dedicated to bond payment, etc.

That's right. But I think a lot of folks don't realize what has to be done to make these things marketable. The 'average joe' thinks that muni bonds are only as good as the underlying city's health, and it is not that simple, or in this case, not that bad for the investor, although it may be exactly that bad for the city itself.

The Times does not do its readers a favor (and I am a subscriber to the Times...it is perhaps the most literate newspaper on this side of the Atlantic) by focusing so much on the plight of the city without ensuring investors that they cans still invest in munis (within reason and very very carefully).

[CosmicCowboy]

That's right. But I think a lot of folks don't realize what has to be done to make these things marketable. The 'average joe' thinks that muni bonds are only as good as the underlying city's health, and it is not that simple, or in this case, not that bad for the investor, although it may be exactly that bad for the city itself.

The Times does not do its readers a favor (and I am a subscriber to the Times...it is perhaps the most literate newspaper on this side of the Atlantic) by focusing so much on the plight of the city without ensuring investors that they cans still invest in munis (within reason and very very carefully).

One of my best friends packages and markets the bonds for SA and Corpus Christi Etc.. I get how it works. It's a big boy market. Cities and Counties can't borrow a dime from a bank. If a podunk city wants to buy a fire truck they have to issue bonds with a guaranteed income stream to pay for that bond/truck that is revealed in the prospectus.

[DMX7]

So now Marcus reads The Times with the rest of us liberal potheads?

[boutons_deux]

http://money.cnn.com/2010/05/28/news/economy/american_cities_broke.fortune/index.htm

and more detail specifically on Wall St corruption with Jefferson County AL

Mayor Arrested as Alabama County Nears Default

http://dealbook.nytimes.com/2008/12/02/mayor-arrested-as-alabama-county-nears-default/

[Wild Cobra]

So now Marcus reads The Times with the rest of us liberal potheads?
I'm about to call him NBADan II.