Source:
NY TimesThey are supposed to help states and cities that are short of cash build roads, schools and bridges. But Build America Bonds, part of President Obama’s economic stimulus plan, are also building something else: controversy.
States and cities have embraced these taxable bonds to borrow money at what they assume are favorable interest rates. The federal government pays 35 percent of the interest costs on the bonds, a huge potential saving. But questions about this multibillion-dollar program are piling up.
For one, Wall Street banks are charging larger commissions for selling Build America Bonds than they do for normal municipal bonds, increasing the costs to the states and cities. For another, the new bonds may be priced too cheaply, enabling quick-footed investors to turn a fast profit as the prices climb, but raising interest costs for taxpayers.
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As if all this were not enough, Wall Street banks — which have pocketed hundreds of millions of dollars in fees from the program — are now releasing research reports warning that states’ financial woes may make the bonds less attractive. Some banks are even telling investors how to bet against Build America Bonds.
Read more:
http://www.nytimes.com/2010/06/16/business/economy/16bonds.html?partner=rss&emc=rss&src=ig
The more things change . . .