If you say “Jefferson County” to a professional in muniland, you will likely get a shudder of mild revulsion. This Alabama county is the biggest example of Wall Street aggression towards a public entity since Orange County, California declared bankruptcy in 1994 after buying too many interest-rate derivatives. Dodd-Frank, the financial-reform law that’s been in effect for a year, changed the rules for municipal bonds and derivatives. But did it change them enough to avert a repeat scenario?
It’s hot down in Alabama
It sounds like we have a deal in Jefferson County, Alabama. This has been a long festering problem where the county is unable to afford the debt payments on $3 billion of bonds for a sewer system built several years ago. Excellent local reporting by KDAF-TV and Birmingham News. It sounds as if Jefferson County wants creditors to reduce the debt owed by $1.3 billion.
Has Chris Christie “fixed” the problem?
Joan Gralla of Reuters reports that Governor Chris Christie will be signing the pension and health-benefit reform law today. This is an important step for the health of New Jersey’s pension plans, and Governor Christie should be lauded for his accomplishment.