Many issues affect the issuance of municipal and other local government Bonds at the present time. The rapidly descending financial ratings of some Bond Insurance Companies is only one of those issues. Declining tax revenues is another, major issue. See generally Joe Mysak, "Buffett Plan Saves Muni Market, Dooms Ambac, MBIA" (Bloomberg.com, Wed., February 13, 2008).
In Florida, a great reduction of local government tax revenues was recently passed by a referendum that was understandably advertised as lowering property taxes. Jennifer Liberto, "Property Tax Relief Makes Bonds Costly/Higher Rates Can Cost Millions in Interest" (St. Petersburg Times Online Corrected Feb. 9, 2008 Report). Now, even the availability and purchase of Insurance by municipalities and other local governments may be in peril due to the effects of lowered tax revenue to support the prospects that if these local governments issue bonds now, that they will pay them back later, or ever.
Questions about Fiduciary Duties of Bond Insurance Companies, or not, are arising at this time as well. Some of those questions are posted on Insurance Claims And Bad Faith Law Blog, linked here.
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