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Posts Tagged ‘municipal pensions’

Weekend Serving of Sense on Cents

Posted by Larry Doyle on June 22nd, 2013 8:24 AM |

For those who care to dig a little deeper in order to gain a greater degree of ‘sense on cents’, I welcome sharing a few commentaries and reports that I found to be of very real interest.

Interested in getting a decidedly wider-eyed and detailed view of the world than what might commonly be delivered elsewhere? Grab a second cup of coffee and span the globe as these noted economists discuss an array of critically important international issues:

1. Ian Bremmer and Nouriel Roubini Unveil the New AbnormalInstitutional Investor

What was really going on within the credit agencies? Talk about aiding and abetting . . . (more…)

Will States, such as California, File Chapter 9?

Posted by Larry Doyle on December 3rd, 2010 6:38 AM |

Are those large waves roiling the world of municipal finance–and centered on California–to be feared?

Are they an indication of an oncoming tsunami? Or are they to be discounted and taken as just another  “Hey, dude, don’t worry. Surf’s up!!”

Well, perhaps those less concerned about what is just ‘off the coast’ may care to ‘break out their boards’ but prudence dictates we take a harder look at what is causing the recent waves in the world of municipal finance. These factors include: (more…)

What Do CA, AZ, FL, IL, MI, NV, NJ, OR, RI, and WI Have in Common?

Posted by Larry Doyle on November 12th, 2009 2:25 PM |

No, these states are not holding a Powerball Lottery . . . although the states themselves could use the winnings.

These states, amongst others, are barreling toward economic disaster.  Don’t take my word for it. None other than the Pew Center on the States produced a report entitled Beyond California: States in Fiscal Peril:

(High five to MC for bringing this to our attention)

California’s financial problems are in a league of their own. But the same pressures that drove the Golden State toward fiscal disaster are wreaking havoc in a number of states, with potentially damaging consequences for the entire country. (more…)

Municipal Finance: Will Uncle Sam Post Bail?

Posted by Larry Doyle on May 26th, 2009 3:09 PM |

Is every village, town, city, and state in our country poised to receive a “get out of jail” free card from Uncle Sam? I linked to The New York Times article, Localities Want U.S. to Support Muni Bonds, in the Newsworthy section of Sense on Cents. Upon further review, it deserves comment.

In my opinion, this support of the municipal market may very well represent the greatest violation of a moral hazard to date. Why? Municipalities are by edict required to balance their budgets. A municipal budget which is able to obviate the tough decisions and choices in the budgetary process will lose that rigor.

Politicians of all stripes will make the case that the municipal default rate is extremely low and, as such, a federal backstop in the form of bond insurance is truly a very low risk proposition. Please allow me to opine that the same argument was made in the quasi-guarantee provided to Freddie Mac and Fannie Mae. Those two giants are now wards of the state having been utilized by politicians from both sides of the aisle as campaign “piggy banks” for the better part of twenty years.

The New York Times highlights that the federal guarantee of municipal debt is not all that Uncle Sam may be asked to bail:

“All kinds of municipal borrowers are facing revenue shortfalls,” said Mr. Decker. “California is the largest example. Some states are better off than others. But all outstanding debt is backed by tax revenues. And municipalities are facing a greater or lesser level of distress.”

Also clamoring for help is a group of municipalities that purchased Lehman debt, which is now nearly worthless. Legislation authorizing the use of relief money to make these purchases was introduced by two California Democratic representatives, Jackie Speier and Anna Eshoo. If approved, this would be more like a bailout than a guarantee, because the federal government would be paying face value for debt that otherwise has little value.

The price tag on that proposal is around $1.6 billion. The argument promoted by the two congresswomen is that the Treasury and Fed allowed Lehman to fail, causing governmental bodies to lose money.

Whether a price tag is $1.6 billion, $1.6 million or $1.6 trillion a potential federal bailout of a poor investment decision is the antithesis of free market capitalism. Where does it end? (more…)

Closer to Home: Let’s Talk About Municipal Finance

Posted by Larry Doyle on March 20th, 2009 12:29 PM |

It appears that almost every financial road lately leads to Washington. Wall Street banks, Detroit based automotive companies, and large insurance companies have all come to Washington to find the financial support that private markets will not provide. Although these large behemoths have attracted the bulk of the media’s attention, the financial health and well being of our state and local municipalities has an equal, if not greater, impact on our personal lives and financial standing.

With municipal pensions rocked by the selloff in the stock market and tax revenues declining as incomes plummet, what will happen to our state and local budgets? Virtually every municipality in the country is faced with the same predicament – that is, rising liabilities and declining asset values and revenues. How do they handle that widening budget deficit? Increased layoffs and rising tax rates both put a greater burden on our communities but they are a reality. (more…)

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