{"id":196948,"date":"2008-03-12T16:36:00","date_gmt":"2008-03-12T21:36:00","guid":{"rendered":"https:\/\/www.panix.com\/~msaroff\/40years\/2008\/03\/12\/local-and-state-governments-call-for-changes-in-bond-rating-system\/"},"modified":"2008-03-12T16:36:00","modified_gmt":"2008-03-12T21:36:00","slug":"local-and-state-governments-call-for-changes-in-bond-rating-system","status":"publish","type":"post","link":"https:\/\/www.panix.com\/~msaroff\/40years\/2008\/03\/12\/local-and-state-governments-call-for-changes-in-bond-rating-system\/","title":{"rendered":"Local and State Governments Call for Changes in Bond Rating System"},"content":{"rendered":"

One of the peculiarities of bond rating is that state and local bonds are typically rated much lower for a given level of risk than those of private entities, which requires that they purchase bond insurance.<\/p>\n

This is the still lucrative core of the now almost insolvent monoline insurers business.<\/p>\n

A number of public officials have expressed their concerns to the rating agencies<\/a>:<\/p>\n

On March 4, Bill Lockyer, the treasurer of California, sent a five-page letter to Moody’s Investors Service, Standard & Poor’s Corp. and Fitch Ratings asking for justice.<\/span><\/p>\n

`”State and local governments almost never default on the bonds they issue,” the letter says. “The safety of municipal bonds is grounded in a fundamental fact: a city or state simply is not going to go out of business during the life of its bond issue.”<\/span><\/p>\n

The letter was signed by 14 other state and local officials, including Michael Murphy of Washington, Michael Fitzgerald of Iowa and Patrick Born, the chief financial officer of Minneapolis. I mention these three in particular because they are public finance veterans who really understand the business.<\/span><\/p>\n

Maybe every one shouldn’t be rated AAA, the letter asserts. Just most of them.<\/span> <\/p><\/blockquote>\n

They are absolutely right.<\/p>\n

As the system stands now, most state and local governments have to buy insurance<\/span> in order to get an AAA rating, but the risk of default is minuscule compared to commercial AAA bonds.<\/p>\n","protected":false},"excerpt":{"rendered":"

One of the peculiarities of bond rating is that state and local bonds are typically rated much lower for a given level of risk than those of private entities, which requires that they purchase bond insurance. This is the still lucrative core of the now almost insolvent monoline insurers business. A number of public officials …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1009,1045,985],"tags":[],"class_list":["post-196948","post","type-post","status-publish","format-standard","hentry","category-government","category-insurance","category-regulation"],"_links":{"self":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/196948"}],"collection":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/comments?post=196948"}],"version-history":[{"count":0,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/196948\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/media?parent=196948"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/categories?post=196948"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/tags?post=196948"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}