Sheila Bair, who served as Chairman of the Federal Deposit Insurance Corporation for five years through the financial crisis, has completed her term. In a weekend op-ed in the Washington Post, she urges America to rid itself of its addiction to financing consumption and “growth” with debt. This is the core requirement for America to become financially stable again and to return to “real” growth. From Bair’s Washington Post oped:
Agnes Crane, a columnist for Reuters Breakingviews, wrote an interesting column today about ending the municipal-bond tax exemption. This tax exemption, granted at the federal level, makes the interest earned on municipal bonds free from taxation on the local, state and federal level if it’s owned by an investor residing at the place of issuance.
Every family encounters times when bills are due and they don’t have money. If this happens to a state or local government, they go to the municipal bond market where they can borrow short- or long-term. In the current market they are likely to find a lot of willing lenders. These lenders will lend at very reasonable interest rates, and the terms of the borrowing will be made public so taxpayers can see what their obligations are.
Fiscally-stressed municipalities have leased roads, airports and statehouses to private entities. I’ve never seen a good compendium of how these privatizations worked for various stakeholders. But it is fair to assume that private investors are attracted because there are ways to increase margins and make profits. A 2008 New York Times article identified some of the approaches used by investors:
The thing I hear most often about muniland is how murky the market is. It is rather astounding that the municipal market is so little understood given its size and its effects on state and local governments and tax rates. To help shake the market up and create more transparency, I thought it would be helpful to start gathering muniland data sets for people to start playing with. Have at it, friends. Please send over any interesting findings.
Centers of power, by their nature, seek to control and hide information, but civil societies and stable governments require transparency to create the bedrock of confidence among their citizens. Every government must commit itself to open dealings and renew that commitment on an ongoing basis. We have good news from the state of Vermont that this commitment has spread to the state and local level.