-- Connecting the dots between our economy, government and business --
Summary and audio linked here.
Chicago’s political leadership is floating a pension buyout program as evidence it is seriously addressing the city’s thirty-six-billion-dollar unfunded pension liability, but Mark Glennon, founder of the Illinois policy research organization Wirepoints, said that the proposal moves debt from one column to another rather than reducing it, and that the broader fiscal picture facing the city continues to deteriorate across every measurable dimension. Audio here.
Expect no retraction or apology. This what they do.
The state’s existing buyout program for its own pensions is the precedent for Chicago, which should be a warning: Look out for similar exaggerated claims and shoddy analysis.
Full interview and summary linked here.
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I have researched muni bonds, bought and sold muni bonds and advised people on muni bond transactions for over thirty years. I have never heard of an official of any government entity asking a rating agency to withdraw ratings. Maybe it has happpened before, but this is a historic blunder by a city that should be looking for help from municipal experts, not trying to hide facts from them and the public.
Right. Not in public, that is. But I have heard credible stories about muni officials in private really hammering the raters, saying things like “If you want any more F-ing business in this and you know what’s good for you, you better….” And even if they don’t say that, implicit threats are in the air. Look at what Indonesia is doing to JP Morgan as retaliation for a bad rating. And Moody’s expects to be sued for rosy ratings prior to the subprime crash. http://www.wsj.com/articles/moodys-says-justice-department-is-preparing-a-complaint-1477056302, so they are in a tough spot.
That would make the scene in The Big Short that much more relevant if the lawsuit happens. Look at how the city switched to Kroll, which gives better ratings than Moody’s. It might serve to focus public attention on how municipalities shop for ratings agencies.
“the mayor said it should be made clear that any opinions from Moody’s are based solely on publicly available information.” Jesus F’n Christ. I’ve looked at the info, especially the revision to the front cover of the upcoming GO bond offering and the numbers are scary bad. It’s all about math, and the math just doesn’t add up to a problem that can be solved without bankruptcy.
Look out Bob, they’ll ask you to mute comments like that…
Eh, we’ll let it pass. Just try to limit the swearing to me when I screw something up.