Puerto Rico Government Development Bank’s clogged balance sheet

June 14, 2013

The Puerto Rico Government Development Bank (GDB) has indicated that it could sell up to $2 billion of bonds this year to refinance loans it made to the Puerto Rico Highway and Transportation Authority (PRHTA). These loans on the GDB balance sheet comprise about 24 percent of the GDB’s assets. The PRHTA is a money-losing operation with $4.7 billion of its own debt outstanding. If the GDB is successful in moving these loans off its balance sheet, then the PRHTA could be carrying up to $6.7 billion in debt on a very shaky revenue base.

Official says Gensler asked not to be renominated

June 13, 2013

The media has been increasingly focused on a replacement for Commodities Future Trading Commission chairman Gary Gensler, whose term expired April of 2012. While up until several months ago the White House had made public its desire to renominate him for chairman, there has never been confirmation from Gensler whether he wanted to retain his post or step down. After I posted a piece encouraging President Obama to renominate Gensler I was contacted by a CFTC official who said that Chairman Gensler definitively did not want to be renominated. This appears to be the first public statement about Chairman Gensler’s intentions.

Obama should not chase CFTC-head Gary Gensler away

June 12, 2013

The Huffington Post’s Shahien Nasiripour brought news of the Obama Administration’s effort to run off the most effective financial regulator since Franklin Roosevelt signed the 1933 and 1934 Securities Acts into law:

Big muniland haircuts

June 12, 2013

Are muniland bondholder haircuts a growing trend? Actually, recoveries (the principal and interest that the bondholders recover in a default) have varied a lot, according to a Moody’s municipal default report published in May:

The cost of defaulting on the 38 Studios bonds

June 10, 2013

The Rhode Island General Assembly’s House Finance Committee heard testimony last Thursday from Matt Fabian of Municipal Market Advisors – an independent research service with about 300 subscribers – about the cost and implications of the state defaulting on the 38 Studios moral obligation bonds. Committee Chair Helio Melo’s main line of inquiry was “Does it cost us more money in the long run” if the state were to default on those bonds?

Muniland’s balance sheet

June 7, 2013

There is always a lot of attention directed at muniland about the number of municipal securities outstanding when the Federal Reserve releases its updated Flow of Funds report (recently renamed the Financial Accounts of the United States report). This data gives a measure of how much municipal borrowing has expanded in the previous quarter. Reuters’ Lisa Lambert wrote about a small increase of outstanding muni debt and shifts in ownership patterns in the first quarter of 2013. Direct ownership of muni bonds by retail investors is declining, while institutions have increased their holdings.

Medicaid: The state budget crusher

June 7, 2013

Under the Affordable Care Act, all 50 states will have exchanges where individuals can buy healthcare insurance. But the second leg of the ACA, whether and how much to expand Medicaid, is every state’s choice. The Supreme Court gave states this right when it ruled on the Affordable Care Act last June.

Infrastructure land

June 6, 2013

The New York State Comptroller, Tom DeNapoli, issued a new report this month that discusses public private partnerships (P3s) and makes recommendations for municipal entities that are considering P3s for infrastructure projects. The report seems to be directed at the New York State Assembly, which had legislation that would have authorized P3s in the state without any limit on size or requirement for oversight. From the report:

Illinois: Driving into a ditch

June 4, 2013

The state of Illinois, which joined the union in 1818, has a state motto: “State Sovereignty, National Union.” The website Netstate says this about the motto:

Meredith Whitney’s “Great Migration”

June 4, 2013

Since I write about muni issues every day, I couldn’t find where Meredith Whitney had covered much new ground in her book, Fate of the States: The New Geography of American Prosperity, which is released June 4. It felt like the book had been written over a year ago and was not in tune with current fiscal realities. For example, on page 117 Whitney says, “We have reached a breaking point for some states. There is no more money.” The only state that I know where that might apply is Puerto Rico. In fact, numerous states are seeing modest surpluses this year and some are rebuilding rainy day funds.