Another Bill Introduced To Rescue Floundering Muni Bond Market

Tyler Durden's picture

It has been a few weeks since the last attempt to extend the Build America Bonds program, even as muni
bond prices continue to stagnate. Which means it is time for another
valiant try, this time possibly using the post-revolutionary chaos in
Egypt as a smoke screen. Bond Buyer reports that Rep. Gerald Connolly,
D-Va., has introduced a bill extending the Build America Bond program
through 2012 at subsidy rates of 32% in 2011 and 31% in 2012. Since we
are certain that Bill Gross is lobbying about as hard as one can to get
this bill passed due to his massive latent muni exposure, this last ditch attempt to subsidize the muni market just could pass. If it doesn't, that could be the bottom of the muni market.

More from Bond Buyer:

The program, which was authorized by the American Recovery and Reinvestment Act in early 2009, expired Dec. 31. It allowed state and local governments to issue taxable bonds and receive federal subsidy payments from the federal government equal to 35% of their interest costs.

The Obama administration had proposed making the program permanent.

But Sen. Chuck Grassley from Iowa, the ranking minority member of the Senate Finance Committee, and other Republicans criticized the program for generating high underwriting fees for investment banks and for rewarding issuers with poor credit by providing them with higher subsidy payments from the federal government.

Connolly’s bill has been referred to the House Ways and Means Committee.

Since Bernanke's debt monetization QE3 program will need a uses of funds, we are fairly confident that this bill won't pass and the muni space will be left to Bernanke to salvage. Although on the other hand, don't forget: it's not the size of the Newport beach bond manager in the fight that matters, it is the amount of corruption in the financial system, the kickbacks and bribes, and the potential loss upside/downside analysis that determines what laws are passed.

h/t Bruce Krasting

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hedgeless_horseman's picture
Plan B for getting those freshly printed $USD into the eCONomy:
Obama Seeks $53B Over Six Years for Rail Network

Wednesday, February 9, 2011


WASHINGTON — Officials in the Obama administration on Tuesday announced plans to spend $53 billion over six years to finance the construction of a national high-speed rail and intercity passenger rail network.

Isn't $53 billion a single digit % of the anticipated cost?

Sophist Economicus's picture

Sure is, and I wonder how Uncle Warren will benefit from this?

New_Meat's picture

Soph: BNI handles freight.  Amtrak loses money.  High speed rail is like leveraged ETFs, a faster way to lose money.

So I say BRKA doesn't play.

- Ned

Rainman's picture

....and we thought the USG would tighten its belt when faced with a $14 trillion deficit ?? Who started that rumor ?? 

KickIce's picture

Obama's going to have to find a way to support the government unions and their pensions, no way can he afford to lose them at this point.

QE to infinity.

Obviously Merideth Whitney was completely off base in her claims.

Zero Govt's picture

yes when the history books are written Merideth will clearly be the 'loon' and Obama, Git'ner and Bernank men of great wisdom solving a debt problem by piling on yet more debt ...history in the making!

topcallingtroll's picture

I hate to be a troll here, but all those overspending blue states can go f themselves.  If there are any overspending red states then they can double f themselves.  If you want to spend more money then raise taxes, bitchez, if you have the tranny balls to do so.

lunaticfringe's picture

gotta agree TCT. Balanced budget amendments exist. Can you imagine the complete FUBAR if every state had their own currency and printing presses like the FED?

KickIce's picture

At least the power wouldn't be centralized.  If one state was screwing up you would have the option of moving to another.

Rick Masters's picture

go look at a chart before u post.

Navigator's picture

+100 for Mr. Masters.  I was gong to tell the troll the same thing but you beat me to it while I was looking for a map of donor states vs. leach states.'s a shocker for ya.  Tax money donor states are mostly the blue states.  The leach states are mostly the red states.

buzzsaw99's picture

blue states steal their money via mortgage fraud. Don't get me started on newyork and their perpetual fascist money machine.

Rick Masters's picture

Could you elaborate on you thoughts? It is cryptic and bold statement to say all blue states obtained wealth via theft. I would say they earned with work and a once great manufacturing base that evolved into more service-based economies, vie structual change.

Thomas's picture

You are not being a troll. The states must suffer the hardships so that they clean up the source of the problem.

New_Meat's picture


"I hate to be a troll here,..."

well then, just be yourself ;-)

and I am really frightened when the Federal Gov't says to the States 'no problemo, we'll take on your debt'

- Ned

Just Observing's picture

"high fees to investment banks and rewards poor credit risk issuers" ???


Hey.....sounds like the Alt-A mortgage debacle all over again !


I LOVE theese kountry !!

rufusbird's picture

" high underwriting fees for investment banks" I am sure more people than Gill Gross are lobbying for it to pass!

lunaticfringe's picture

What floundering muni market do you speak of TD? All I've been reading lately is the EE desperately trying to marginalize Meredith Whitney and label her a member...dare I say...of the lunatic fringe.

Id fight Gandhi's picture

Fcking let them default.

Why Shiism a states debt be nationalized. The sooner the revolution here starts the sooner we can live real lives.

Pure Evil's picture

Well, why wouldn't Emperor Obama want to make the program permanent.

Just one more nail in the coffin of State Sovereignty.

LostWages's picture

Kick that fucking can down the road one more time......will be the last time...we us...your govt would never lie to you!

Of course the can is now a 55 gal drum and its full of shit...gonna need a bigger boot to kick this one, and watch out for the cliff that is getting closer.

RobotTrader's picture

With the S & P 500 gains now approaching 100% off the March 2009 lows.....Even while the unemployment number is still 9% and the RE market is in tatters.

The Bernank must be laughing at the chest-beating bears, naysayers, and perma-gloomers.

Wouldn't surprise me to see him:

- Outright nationalize the entire McMortgage industry

- Extend unlimited support for the entire Muni Bond market, and nationalize later if necessary.

Meanwhile, oil continues to get clubbed, and gold is subdued.  Confirming his assessment that "inflation is contained" by the official, doctored, old-school government measuring stick.

Incredible but true.  The PPT has everything under 100% control.

They must be gloating at their huge success.

Crime of the Century's picture

Until it ain't. Zero Hedge becomes Zero Stroke...

butthead's picture

Ya let me print a few trillion I could throw a party and gloat as well.

gwar5's picture

That's just insane to try to pass that bail out bill

Let them die. Let them reorganize and file bankruptcy

Let them change their ways by all manner of painful contortions, if need be

If it's painful they won't forget it for 3 generations before they go wild again

Seasmoke's picture

the next time they kick the can , we need to kick them in the teeth.....i dont believe peaceful revolutions change anything

LawsofPhysics's picture

Let the states fend for themselves.  Then people will find out exactly how much their "services" are worth.  All this financial bullshit is based on "mark to unicorn" accounting.  The entire world needs to wake up and realize their shit isn't worth what they think it is.  Better have a real skill folks, soon enough the black market will be much bigger than any exchange.

bunkermeatheadprogeny's picture

This is precisely the kind of story I was looking for when the MSM's attention is on Egypt.

Reminds me of the Goldman settlement when the BP well was capped.

ChanceIs's picture

To be sure, I just got on the phone to my Congressman after reading this.  Read my lips buddy:  I don't want you subsidizing California municipalities who pay prison guards $100K who can retire at age 38. F'em.  And Bill Gross as well.

Johnny Lawrence's picture

In the last couple weeks, I've actually been buying some munis issued by the likes of Harvard, U-Texas, Yale...I think there's some good value there.


New_Meat's picture

Ya, Mohammed thought that way too, like in the mid-uh-ohs.

Then he left the world's most perfect university, that oh by the way was following the Yale priced to perfection model "Endowment Fund."  Now he's with PIMPCO working the snot out of K-Street to get the law his and Bills way.  Got any track record on the ... er ... 'drawdown' that Yale's endowment experienced?

I hadn't seen the tax/revenue stream coming out of Cambridge, Austin, and <<gag>> New Haven.  Wow, this might be interesting!  Got a link to prospectus?  Or are these 'special' offerings for 'IVY' types.  :-)

- Ned

Johnny Lawrence's picture

You'd fit right in with the big brokerages. It's not contrarian to diss bonds right now. You bullish on stocks too?

If think Univ of Texas is going to default on their bonds, that's a bit retarded.

New_Meat's picture


"You'd fit right in with the big brokerages."

au contraire, Jacque.

"If think Univ of Texas is going to default on their bonds, that's a bit retarded."

I thought all of you liberal "kinder, gentler" types eschewed (ya, look it up) such perjorative terms as 'retarded.'

But yes, hook'em bonds? Give me a break.

Not worried about TX GOs.  On the other hand (I spelled it out for ya) CA, IL, RI, NV ... GOs?  In real trouble.

and well, I'll spell it out for ya: we can start here

and walk down the list.

- Ned

(why, that is Meredith's list ...)

Buck Johnson's picture

It won't pass because the republicans are trying to quietly put through a provision/bill that would make it possible for states to file for bankruptcy.  They want this because it will give the state the ability to change the retirement and pension rules in regard to state unions (who have been the democrats base mostly).  So it's a political thing to them.  Also it won't go because as one said and I agree, they are going to need the money for QE3 sometime this year.  We are on a collision course with hyperinflation.  Johnny Lawrence, how do you think that the University of Texas portfolio is doing and also their enrollment?  They can easily default on bonds if most of those bonds where part of a state rollup where the state put the University systems bonds into the state's as a whole to have a cheaper rate.


New_Meat's picture

"... republicans are trying to quietly ..."

... er, dude ... There ain't no 'quitely' when the Senate is of the party of opposite persuation and the Prez is of unknown but certainly non-R persuation.  So again, don't matter what the house does, it won't be 'quiet.'

but buck along and enjoy the night.

- Ned

f16hoser's picture

Sold all my savings bonds and bought my initial stash of Silver bullion about a year ago. Smartest thing I ever did.