tag:blogger.com,1999:blog-1588280325775325323.post1851142895206003586..comments2023-12-24T05:26:48.861-05:00Comments on The Pittsburgh Comet: "SWAPTIONS": The Water Authority Bond SchemeBram Reichbaumhttp://www.blogger.com/profile/05620172942925293407noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-1588280325775325323.post-38701651833393442922009-03-13T10:48:00.000-04:002009-03-13T10:48:00.000-04:00John:You amaze me with your insight and knowledge....John:<BR/><BR/>You amaze me with your insight and knowledge. Lets make Internet money bond whoopie!<BR/><BR/>BRANYXT!Lady Elainehttps://www.blogger.com/profile/13428096414178188141noreply@blogger.comtag:blogger.com,1999:blog-1588280325775325323.post-90297739815626277792009-03-13T08:20:00.000-04:002009-03-13T08:20:00.000-04:00This comment has been removed by the author.Johnhttps://www.blogger.com/profile/14604648477753993483noreply@blogger.comtag:blogger.com,1999:blog-1588280325775325323.post-54214465627548735762009-03-12T20:58:00.000-04:002009-03-12T20:58:00.000-04:00My head just exploded.This conversation needs to m...My head just exploded.<BR/><BR/>This conversation needs to move to a classroom at Carnegie Mellon.Lady Elainehttps://www.blogger.com/profile/13428096414178188141noreply@blogger.comtag:blogger.com,1999:blog-1588280325775325323.post-11368475745408223342009-03-12T18:49:00.000-04:002009-03-12T18:49:00.000-04:00The insurance premium is pretty standard for a mun...The insurance premium is pretty standard for a municipal bond that is not backed by general obligation revenue or someone's full faith and credit. <BR/><BR/>Now onto your question regarding Slide 3. The risk that is being referenced is valuation risk which is the opposite of interest rate risk. As interest rates go down, the value of a fixed rate bond increases and vice versa. Under the VRS scheme for the PWSA, the PWSA and thus City residents are ultimately taking on the valuation risk while under a fixed rate system, the bond holders would be the ones who locked in a thirty year payment off of a variably valued asset.festerhttps://www.blogger.com/profile/01718756982251152390noreply@blogger.comtag:blogger.com,1999:blog-1588280325775325323.post-5319810013497963742009-03-12T08:45:00.000-04:002009-03-12T08:45:00.000-04:00FYI, you can get official statements for municipal...FYI, you can get official statements for municipal bonds from the <A HREF="http://emma.msrb.org" REL="nofollow">website of the Municipal Securities Rulemaking Board</A>, and after a cursory look on my part, I think that <A HREF="http://emma.msrb.org/MS268146-1.pdf" REL="nofollow">this is it</A>.<BR/><BR/>I don't fully understand the distinction between this form of variable-rate bonds on the one hand and auction-rate securities on the other, which blew up in late 2007/early 2008 to the consternation of UPMC and many other obligors on munis. In any case it is clear that many of the principles are the same, and that the downturn in the markets means that the supposed bargains for municipal debtors -- sold to them by the "financial services" industry -- are not bargains after all. It's not only the downturn in the averages of other swaps, it's the decision of one of the firms not to guarantee the sales; is this not very similar to the auction-rate securities problem?<BR/><BR/>Dowd has done good work in exposing this, though it's a stretch to single out Ravenstahl for this. Corruption is rampant in muni world. Negotiated sales -- as distinct from competitive bidding -- are almost standard now when it comes to munis. If Dowd is serious about changing this way of doing things, then I am pretty impressed, but I am less impressed if it amounts to a campaign stunt exposing just one deal among many.<BR/><BR/>Also, it is my understanding that there are some legal restrictions on the cost of issuance, or at least on the fees paid to underwriters. These rules are rarely enforced though. 5% seems pretty damn high to me.Felix Dzerzhinskyhttps://www.blogger.com/profile/07860738558123466207noreply@blogger.comtag:blogger.com,1999:blog-1588280325775325323.post-85578840953149939502009-03-11T12:48:00.000-04:002009-03-11T12:48:00.000-04:00On the ther hand, Eckert Seamans was one of the tw...On the ther hand, Eckert Seamans was one of the two entities that wrote the original five year Act 47 plan. Will they write then next one this year? Will they take into consideration that they warned against this deal, and limit Pittsburgh's ability to independently make such deals in the future, forcing us to obtain the approval if the ICG and Act 47 team thingies?<BR/><BR/>Did anyone see 60 Minutes on Sunday? Besides a report on the proven unreliability of eyewitness testimony in criminal trials that all our candidates *should* be scrambling to comment on, there was a report on the involvement of transit authorities with certain debt deals. Basically the arrangement was for transit agencies to borrow money from banks, buy light rail cars and then sell the cars t the banks. The Banks would then lease the cars to the transit agencies, and the banks would take the tax write-off from depreciation. Banks, of course, are for profit entities (not so much these days) and the transit agencies are non-profits. The banks would split the benefit f the tax write off, so everyone would win. Except … the fine print of the agreements called for an insurer, and specified the insurer had to be solvent. In the case of Washington DC, San Francisco and some others, the insurer was AIG, which has not remained solvent. So the banks are demanding full payment of the leases immediately. It is entirely legal, but pretty nasty. Are we sure nothing like that is in the PWSA debt package agreement?EdHeathhttps://www.blogger.com/profile/09109361235271107574noreply@blogger.comtag:blogger.com,1999:blog-1588280325775325323.post-39108082731560816732009-03-11T08:38:00.000-04:002009-03-11T08:38:00.000-04:00Bram, this is an excellent post. I agree with MH ...Bram, this is an excellent post. I agree with MH on Dowd blowing the whistle on this; he should get all the credit.<BR/><BR/>I wouldn't be so quick to absolve Eckert Seamans of there role in these transactions though. Both ALCOSAN and PATransit did these five or six years ago and they'll be paying that off for the next twenty-five years. Eckert Seamans is the solicitor for both of them and was heavily involved in both deals. Who knows, maybe they found religion.Pittsburgh Conservativehttps://www.blogger.com/profile/07702095709034487926noreply@blogger.comtag:blogger.com,1999:blog-1588280325775325323.post-31234898620698540062009-03-10T22:58:00.000-04:002009-03-10T22:58:00.000-04:00Slides #9 and #10 look like the real punchline to ...Slides #9 and #10 look like the real punchline to me. That Dowd was the one to call attention to this is enough to sell me on him.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1588280325775325323.post-3500724162891181342009-03-10T22:02:00.000-04:002009-03-10T22:02:00.000-04:00zzzzzzzzzzzzzzzzAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-1588280325775325323.post-39787768781221251012009-03-10T21:41:00.000-04:002009-03-10T21:41:00.000-04:00So Pittsburgh is locked into weekly financial tran...So Pittsburgh is locked into weekly financial transactions (which incur fees for each transaction) until 2047? And the vendor got that business without competition? Hello, US District Attorney!Vannevarhttps://www.blogger.com/profile/08513110035186346571noreply@blogger.comtag:blogger.com,1999:blog-1588280325775325323.post-63636392589535077872009-03-10T21:17:00.000-04:002009-03-10T21:17:00.000-04:00Ed you suggest:But I am not sure that this is a go...Ed you suggest:<BR/><BR/><I>But I am not sure that this is a good time to confront investment banks. Unless maybe we get the State involved (an audit from the Auditor General?).</I><BR/><BR/>Um, worth a shot. Perhaps the federal government? Perhaps Casey and Specter? Maybe Doyle?Bram Reichbaumhttps://www.blogger.com/profile/05620172942925293407noreply@blogger.comtag:blogger.com,1999:blog-1588280325775325323.post-89163159708832177172009-03-10T20:47:00.000-04:002009-03-10T20:47:00.000-04:00Thanks. I can barely understand some of that stuf...Thanks. I can barely understand some of that stuff. I will have to reread about a hundred times, but 2047 and $20 million up front are the zingers. <BR/><BR/>my verification word--shmedath!Lady Elainehttps://www.blogger.com/profile/13428096414178188141noreply@blogger.comtag:blogger.com,1999:blog-1588280325775325323.post-32506418142368853852009-03-10T20:40:00.000-04:002009-03-10T20:40:00.000-04:00Good post, Bram. A lot more important than college...Good post, Bram. A lot more important than college background on Dok. But I am not sure that this is a good time to confront investment banks. Unless maybe we get the State involed (an audit from the Auditor General?). We might need a big gun standing with us if we are knocking at the door of a bank. <BR/>Just a thought.EdHeathhttps://www.blogger.com/profile/09109361235271107574noreply@blogger.com