Sunday, November 13, 2011

JeffCo Proves Need for Covenants It Can't Break

The National Federation of Municipal Analysts called an emergency board meeting Friday to announce a new program - the Municipal Darwin Award.

The meeting took place in an abandoned warehouse with all attendees wearing full-brimmed hats low to cover their faces, which were already covered with disgust. "We must make the broader financial community believe that these bonds cannot survive such political negligence - but how!" remarked Jason Kissane, chair of the California society, referring to the recent actions of the Jefferson County Commission. "Who will ever believe it?"

Kissane and his colleagues then expressed concern that the wider financial community would have much less demand for their work and employment if they discovered the true strength of the most notorious credit in the municipal market. The basic truth is that a bankruptcy would 1) offer no method to impair an unlimited source of revenues, 2) no method to "unsecure" a secured asset, 3) not result in an automatic stay of secured revenues, and 4) JP Morgan was only going to agree to a large haircut as a de facto settlement of fraud and other charges against it relating to the sewer debt underwriting.

As the meeting approached complete despair, a dark figure smoking a cigarette emerged from the shadows, directed the board to enact the Darwin program and immediately give the first award to  Jefferson County. "Fabian!" Shrieked Dan Clifton, policy analyst at Strategas, like a little girl.

"Stick to the Feds," growled Matt Fabian of MMA, the man from the shadows. Fabian implored the men and women to stop crying as he explained that the Jefferson County issue would not be resolved for years. By the time full recovery is achieved on the sewer warrants the broader financial community and public would not being paying attention anymore, Fabian continued.

"The Jefferson County Commissioners still actually believe that they can impair the security of the sewer credit. While JeffCo mismanagement represents perfectly the underpinning for the strong legal protection of this type of credit, it will also ensure the general public remains bewildered by the fiasco." By the time it's all over "the public will be claiming Goldman Sachs tricked them into buying gold at $15,000 an ounce and won't care about much else."

Fabian also noted that the more likely impairment of limited-tax general fund debt could act as a ruse.

As the sounds of crying babies and desperate voices subsided, Fabian's initiatives were enacted and various stories were planted in the mainstream and broader financial media. (View one here.)

(In all seriousness The Blue Dragon stands by everything that was said on this posting from July: .)

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