Muni sweeps: Politicians can do it too

May 10, 2011


Blogging politicians

The House Financial Services Committee is blogging!

Right on!

Here is why they are doing it:

We believe that during this time of ongoing economic uncertainty there are questions being asked that are not being answered. We believe there are areas of financial services regulation and housing policy that are being overlooked which demand scrutiny.

We believe that there is a need for clear, concise appraisals of policies and ideas as opposed to “inside baseball” commentary.

We believe there are reporters, congressional staff, advocates, academics, constituents, and Members of Congress who have interest in financial issues, but don’t necessarily have the time to do the digging, and we hope this blog makes it easier.

This is just one part of their social media program. I hope they commit adequate resources to the effort and are not discouraged by early failures. It takes some stumbling around to get social media right.

Now it’s time for Barney Frank and his team to get up some posts too.

‘A Dangerous Place to Invest’

This is the most provocative press release I’ve seen in ages.

The founder of, Kevin Olson, says:

“The muni markets have never been a fair marketplace but current conditions for investors are as bad as they’ve ever been and getting worse.”

Investors are at a severe disadvantage because most underwriters of municipal new issues do not provide any liquidity or bids, Olson explained. Municipal bond investors wanting or needing to sell are completely at the mercy of broker/dealers with no interest in providing a bid.

“They go out and find another broker/dealer to bid on your bond, and that broker/dealer may in turn go to a third, and so on. If you were to purchase $100,000 of a bond in the morning, later that same day your investment could be worth only $75,000 or less,” Olson said.

Here is the report. Calling the MSRB.

Too much information for retail?

The Bond Buyer has a piece out today questioning whether there is too much information floating around for retail investors.

The volume of muniland data is a small sliver of what is available for the equity and mutual fund spaces.

I think it may be a little patronizing to say investors can’t process the municipal information that is available.

From the Bond Buyer:

“I think more information is generally always better,” said Chris Mier, chief municipal analyst at Loop Capital Markets in Chicago. “The problem is the accuracy of the information being given, and what kind of interpretation is being provided with it.”

Mier said it’s difficult for the retail investor to discern the difference between those that are qualified to render opinions and those that are not.

That challenge is compounded by the flurry of data posted on the Internet, sources said.

Obtaining the investment information from valid sources and separating fact from fiction is the key to understanding and utilizing the bulk of research available on the web.

“Information is always a good thing, but it’s a matter of organizing that information,” noted Bill Mason, senior vice president of municipal trading and underwriting at David Lerner & Associates in Syosset, N.Y.

“With the Internet today, it’s like a graffiti wall — whether it’s the truth or not the truth, an individual is going to have a hard time sorting through the information because they have no control over what goes on the Internet,” he explained

IRS red-flagging BAB’s

The Bond Buyer has an excellent article on efforts underway at the IRS to police the Build America Bonds program. The article covers a lot of ground about the tax treatment of municipal bonds.

From the Bond Buyer:

The Internal Revenue Service’s tax-exempt bond office has received referrals of around 30 whistleblower claims of potential abuses in the municipal bond market, an official said Friday.

Speaking Friday at the American Bar Association tax-exempt financing committee’s spring meeting here, Clifford Gannett, acting director of government entities at the IRS, said 30 represents “a fairly significant” amount of claims.

Mini sweeps:

Smartmoney: The Growing Impact of “Mini Muni” Bonds

Barron’s: Picking Munis in a Roiled Market

Institutional Investor: The Evolution of Water Risk in the Municipal Bond Market

Seeking Alpha: Research Primer: The Risks and Rewards of Municipal Bond Arbitrage

Wall Street Journal: NYSE Arca Cancels All Trades In Pimco Bond ETF

Wall Street Journal: Illinois Education Overhaul at Risk

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