unable to find the money for essential services.
Last week the city of Vallejo,California became a casualty of the subprime mortgage crisis.As homeowners could not afford the higher interest rates after a reset,the county’s tax base collapsed and the city could no longer pay its police,firemen and other officials.It has declared bankruptcy.
Even with the mortgage crisis the city could have weathered the crisis if it had not been shelling out money for years under an insurance scam perpetrated by the ratings agencies like Fitch,S&P and Moody’s.Essentially, these agencies intentionally gave a lower credit rating to municipalities compared to corporations even though municipalities have taxing authority that brings steady revenues and their default rate is practically zero.Corporations on the other hand have much higher default rates on their bonds.
Yet the agencies have continually rated bonds from municipalities lower than corporate bonds.Not merely that, the bond insurance companies,in cahoots with the rating agencies hit the municipalities for fat fees to rate them again after they took out insurance from the Bond Insurers like Ambac,MBIA etc.That steady stealing of funds from the municipalities continues to this day.
If the municipal issues were valued and rated correctly,not only would local and state governments save money on the premiums but would not have to pay for the “services” of the ratings agencies at all.
I am surprised that other than Barney Frank, no politicians,Republican or Democrat, has raised a stink about it.
We should end this billion dollar windfall for the Insurance companies and get the moneys available for people who are paying taxes to receive services.
There is only one word for this: Daylight Robbery.
Klatoo, I altered your title so that people could post comments. It was so long that many posters who don’t know how to shorten the subject line may have been unable to make a response. I hope this meets with your approval.
And an excellent, informative diary which gave me new info I didn’t have before. Thank you!
Thank you Steven.My dad used to say “you did well but you have a lot of scope for improvement”.LOL!
Sign of the times:
Workers shifting to 4-day week to save gas
Some great ideas of the Reagan Bush Era:
1.If you cut the tax rates,tax revenues will soar.Voila,if you eliminate all taxes, your tax revenues cannot be counted even by the fastest teraflop computer.
2.If you let employees work four days a week,they will save 20 percent gasoline.If you let them work only one day a week,they can save 80 percent.
Between the tax savings and the gas savings we will all be rolling in dough.