State Treasurers Should Clean Up Their Own House;
Municipal Bond Pricing, Disclosure

State Treasurers are jumping on the bandwagon and fighting for investor rights. Great! Their rhetoric includes things like fair pricing, disclosure and so on. They say it is their responsibility to step up in these areas because they are involved in, or in charge of, investment boards.

But the public should understand that the biggest responsibility for State Treasurers is that of a bond issuer—a borrower of money for their State's financing needs. In this role, they are the opposite—they are Wall Street—and in this capacity they act worse than any corporation, accounting firm, mutual fund or hedge fund.

If you think the mutual fund business has problems, then hold on because the Municipal Bond industry is much worse.

One of the problems is Municipal Bond pricing—
MunicipalBonds.com has uncovered and exposed wide spreads as well as negative yields in the Municipal Bond markets. There are thousands and thousands of examples that clearly prove Muni Market problems are pervasive and chronic. Please see the daily, quarterly and annual Worst Spreads and Negative Yield reports at www.MunicipalBonds.com.

I have taken the problems with Muni Market pricing to State Treasurers and asked them to do something, pleaded that they step up and act on behalf of Municipal Bond investors within their States. They refuse and do not want to do anything in this area. They say that "once we've issued the bonds then it is no longer our problem...we have our money and that's all we care about." This attitude has worsened a structurally flawed and problematic market, and is part of the reason why the secondary market for Municipal Bonds is no better than the secondary market for vacation time shares.

Another problem is disclosure—
I have begged State Treasurers to include a description of the secondary Muni Markets within their official statements. They refuse and say they "don't want to set any precedents." But State Treasurers have been setting precedents by issuing billions and billions of dollars of Municipal Bonds. If not now, what would be a better time for a disclosure precedent. But this is just one problem when it comes to Municipal Bond disclosure. Muni disclosure is deplorable. Even institutional investors complain about it; for individual investors Muni disclosure is non-existent.

So State Treasurers are meeting at the Waldorf-Astoria in New York City (Nov 22-24) to talk about corporate governance, NYSE compensation, mutual fund trading and so on. Go for it. I support them as investors of public funds. But the people need to know that as borrows, as issuers of securities, State Treasurers have no right to point fingers. If State Treasurers are going to clean house, they should clean their own.

Kevin Olson
URL: MunicipalBonds.com
Email: Kevin@MunicipalBonds.com
(415) 922-7870