By Catherine Austin Fitts
This Thursday, I will be talking with Joe Mysak about trends in the municipal markets. Joe has made a career of helping his readers understand the municipal bond markets – from educating local officials about how to manage municipal bond issues to helping bond investors understand when something is amiss.
I first met Joe when he wrote for The Bond Buyer, then read him regularly as a subscriber to Grant’s Observer. Since 1999, Joe has served as editor of Bloomberg Brief Municipal Market.
Joe is the co-author of The Guidebook to Municipal Bonds (1991), author of The Handbook for Muni-Bond Issuers (1998) and has just published a new book which I highly recommend to those of you who want the best resource book on this market – Encyclopedia of Municipal Bonds: A Reference Guide to Market Events, Structures, Dynamics, and Investment Knowledge.
Municipal finance is a powerful theme that weaves throughout our lives. Yet, these taxation, spending and investment flows are invisible to most people. Whether in cities, suburbs or in rural areas, there is a tremendous opportunity to learn and improve how municipal markets weave through the financial and living ecosystems around us.
• You are a mayor – you and your Treasurer are lobbied to issue bonds to fund projects. You can do a better job of picking the positive projects if you can understand which banks are trustworthy and how the process of bond issuance is properly managed.
• You are on your local planning board – you struggle to balance the need to preserve water, land and other precious environmental resources with a growing population and businesses that wish to exploit them. Knowing of municipal success stories from around the world helps.
• You are a beneficiary of a state pension fund which has been purchasing taxable municipal bonds and is increasing the required contributions from the local municipalities because investment performance has suffered from falling yields. You want to know what your legislative representatives can do to support better performance.
• You are responsible for your family finances. You have invested a portion of your savings in municipal bonds or tax-exempt mutual funds for your state. You find the tax-exempt status attractive. However, you are concerned that some policy makers are proposing that this tax exemption should be reduced. As the dollar loses purchasing power and municipalities struggle with falling revenues and shrinking tax base, you wonder whether these are sound long-term investment. What should you do?
• You are responsible for the municipal bond portfolio at a large insurance company – one that sells annuities to people in your family and neighborhood. As the banking and sovereign debt scandals continue in the media, you need to know whether you can trust the rating services to assess the value and credit worthiness of the bonds in your portfolio.
• You are a concerned voter and taxpayer. As the housing and real estate prices and sales have fallen, our military forces and more agriculture and manufacturing production moved abroad, local employment, small business income and municipal revenues have decreased. The pressure on municipal budgets is enormous. The city council is struggling with the same debasement of their reserves and inflation in expenses as you are – and they are now choking on the debt service on bonds issued in happier times. Are your taxes going to go up? And what can your local officials do to prevent it? Is there any risk of bankruptcy of the town or related public corporations? What would that mean to you?
• You have children and are worried about their education. Your property taxes are significant. Yet you don’t send your children to the local school that your property taxes fund because you believe the curriculum is inappropriate for helping your child be successful in the 21st century and the ongoing testing is deeply invasive of your privacy. Whether you send your children to a private school or home school, you are paying twice.
• You are concerned about community safety. Your house was burglarized. You heard the burglars trying to get in. However, it took 45 minutes for the Sheriff’s office to send someone – and it was too late. The reality is that their office has a limited budget. Staff time is dominated by processing foreclosures, leaving limited resources to protect citizen assets.
No matter your point of view, we are well served by a reporter of Joe’s caliber bringing attention and transparency to the municipal markets.
I will start with Money and Markets and Ask Catherine. For great movie ideas, check out the special Jon Rappoport and I did last week on Let’s Go to the Movies.
Post your questions for Joe and me on the blog.
Talk to you Thursday!