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Wall Street Set to Panic as Muni Bond Sales Slide
July 21, 2006 (Bloomberg - Joe Mysak)
Shut down the municipal bond department!
States and localities are likely to sell the smallest amount of municipal bonds in five years, a development sure to create havoc on Wall Street, where it's always, What have you done for me lately?
So far this year, about $200 billion in municipal bonds have been sold, according to Bloomberg data. With the year a little more than halfway done, it looks like the 2006 final total will be about $350 billion. That would be the smallest amount since 2001, when the final tally was $288 billion.
In the big biography of this fall, "Mellon: An American Life'' -- think Ron Chernow's "Hamilton'' or Jean Strouse's "Morgan'' or even David McCullough's "Adams'' for similar examples -- British historian David Cannadine writes of Thomas Mellon, famed financier Andrew's (1855-1937) father:
"He thought politicians, except for Senator James Ross, were self-seeking and dishonest, fiscally extravagant and financially irresponsible; they plunged cities and states into debt, resulting in inexorably and inexcusably rising taxes.''
Reading that line, I thought, my, how quaint. You have to struggle to find anyone who protests against cities and states plunging into debt nowadays.
AntiSpin: Mysak's criticisms aside, the Cato piece Mushrooming Muni Bonds is very good.
"Most people know that the federal government is amassing large debts and unfunded liabilities. But they may not know that state and local governments are doing the same. The latest data from the Federal Reserve Board show that total state and local debt jumped from $1.19 trillion in 2000 to $1.85 trillion by 2005, an increase of 55 percent."
The problem with cities and towns going deep into debt is that cities and towns, unlike the federal government, can't print their own money or borrow from China or Japan. As the Cato piece warns: "The eagerness to spend is even spurring officials to securitize future federal aid payments in the form of 'grant anticipation' debt. Why wait for future federal housing or highway aid when you can go to Wall Street and turn promised aid into cash to spend right now? The problem is that when the future arrives and federal aid is consumed by debt servicing, politicians will likely declare a 'budget crisis' and demand tax increases."
Are you ready for a heady jump in local taxes?
July 21, 2006 (Bloomberg - Joe Mysak)
Shut down the municipal bond department!
States and localities are likely to sell the smallest amount of municipal bonds in five years, a development sure to create havoc on Wall Street, where it's always, What have you done for me lately?
So far this year, about $200 billion in municipal bonds have been sold, according to Bloomberg data. With the year a little more than halfway done, it looks like the 2006 final total will be about $350 billion. That would be the smallest amount since 2001, when the final tally was $288 billion.
In the big biography of this fall, "Mellon: An American Life'' -- think Ron Chernow's "Hamilton'' or Jean Strouse's "Morgan'' or even David McCullough's "Adams'' for similar examples -- British historian David Cannadine writes of Thomas Mellon, famed financier Andrew's (1855-1937) father:
"He thought politicians, except for Senator James Ross, were self-seeking and dishonest, fiscally extravagant and financially irresponsible; they plunged cities and states into debt, resulting in inexorably and inexcusably rising taxes.''
Reading that line, I thought, my, how quaint. You have to struggle to find anyone who protests against cities and states plunging into debt nowadays.
AntiSpin: Mysak's criticisms aside, the Cato piece Mushrooming Muni Bonds is very good.
"Most people know that the federal government is amassing large debts and unfunded liabilities. But they may not know that state and local governments are doing the same. The latest data from the Federal Reserve Board show that total state and local debt jumped from $1.19 trillion in 2000 to $1.85 trillion by 2005, an increase of 55 percent."
The problem with cities and towns going deep into debt is that cities and towns, unlike the federal government, can't print their own money or borrow from China or Japan. As the Cato piece warns: "The eagerness to spend is even spurring officials to securitize future federal aid payments in the form of 'grant anticipation' debt. Why wait for future federal housing or highway aid when you can go to Wall Street and turn promised aid into cash to spend right now? The problem is that when the future arrives and federal aid is consumed by debt servicing, politicians will likely declare a 'budget crisis' and demand tax increases."
Are you ready for a heady jump in local taxes?
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