Public Finance, Not Wall Street Profit : What comes first; "the public budget or the Municipal Bond"? What is all this stuff?
November 2011
Similar to the question; "What came first?...the chicken or the egg?", things are so messed up in U.S. public finance the question needs to be asked; "what comes first?...the public budget or the Municipal Bond?"
Public, or Municipal, budgets have been, are and will be in bad shape. This is no secret any longer, and there will be more to come on Municipal budgets and resulting public finance.
But there have been some recent high-profile Municipal defaults...
ie: Harrisburg, Pennsylvania and Jefferson Co. Alabama for example...
where there is a lot of funky public finance involved.
There are derivatives and swaps and refundings and industrial development and more derivatives and swaps, and so on...
What is all this stuff? It is not the traditional, safe and secure Muni Market.
What is worse is the funky debt "stuff" acutely impacted the Municipality itself.
The debt itself became the problem for the Municipal budget. It wasn't the other way around.
So why is all this funky public finance debt stuff being issued. Did the budget really demand it? The concern is that debt product is being issued for the primary purpose of underwriting that debt... for the primary purpose of Wall Street profit.