By Saqib Bhatti and Brittany Alston, Action Center on Race & the Economy | September 4, 2020
As the nation adjusts to the new reality of life in a pandemic, it has become clearer than ever before that a robust social safety net is essential to the health and vitality of our communities. The COVID-19 pandemic has confirmed what we already knew: that we need to dramatically expand and fully fund public services like healthcare and education and public utilities like water, heat, electricity, and broadband internet access. Unfortunately, the economic impact of the pandemic has wreaked havoc on public budgets, leaving state and local governments across the country to face down staggering revenue shortfalls at precisely the moment when the urgency of massive public investment in our communities is most apparent.
Importantly, the pandemic did not create the need for a strong, robust social safety net. It simply magnified it. Similarly, the need for strong investment in our communities existed long before the pandemic and will continue to exist long after. In fact, our past failures to fully and equitably fund public services have helped create the systemic inequities and structural conditions that have made COVID-19 so deadly for Black, Indigenous, and Latinx communities in particular. In order to make our communities resilient enough to withstand all the future natural and manmade disasters that our extractive economic system will bring, we need to change the way our governments raise and spend their money. Full recovery requires robust public investment in our public goods and services. Instead of making more cuts to critical services in our public budgets, it’s time we look to cutting the exorbitant profits Wall Street makes from our municipalities.
The ultra-wealthy and corporations have been starving our public budgets for decades, even before the COVID-19 pandemic. Following the failed theory of trickle-down economics, our federal, state, and local governments have showered corporations and the rich with lavish tax subsidies and tax cuts in exchange for broken promises of job creation and economic growth.1 However, communities that have already experienced decades of rampant disinvestment can no longer afford to settle for forgone tax revenue as a result of failed market-driven solutions.
We need to raise progressive revenue by taxing billionaires like Jeff Bezos, Mark Zuckerberg, and Elon Musk, who have seen their wealth grow by leaps and bounds during the pandemic,2 and large corporations like Visa, Microsoft, and Pfizer that have made windfall profits while most Americans have struggled to make ends meet.3 We also need the federal government to provide direct aid and grants to our state and local governments to help them get back on their feet. But that is not enough. We also need to cut regressive expenses. This includes divesting from policing and investing that money back into community-based services. It also means eliminating our interest payments on municipal debt, which transfer more than $160 billion every year from taxpayers to wealthy investors and banks on Wall Street. This last idea is the focus of this paper.
We can do this by demanding the Federal Reserve make long-term zero-cost loans available to all state and local governments and government agencies in the United States. This would enable our governments to do two things. Firstly, they could take out new loans to pay for long-term capital projects to make our infrastructure more resilient without having to pay any fees or interest, dramatically reducing the cost of future borrowing. Secondly, they could refinance all their existing debt into new interest-free loans. Doing so would allow our cities, counties, states, territories, and government agencies to cancel nearly all of their existing interest payments and save more than $160 billion a year.
This would be particularly beneficial for state and local governments that serve higher concentrations of people of color, who are more likely to have to pay higher interest rates than governments that serve whiter communities. By eliminating interest payments to Wall Street, our public officials would be able to invest that money back into community services and infrastructure.
The Federal Reserve should offer state and local governments long-term, zero-cost loans, not only as an emergency pandemic response measure to help state and local governments get through the budget crises they are currently facing, but as a permanent, ongoing policy from this point forward. There is no reason for American taxpayers to pay banks and bondholders a dollar in fees and interest for every dollar that they borrow when the nation’s central bank could offer them loans directly without charging any fees or interest.
What Could We Pay for with $160 Billion?
If the Federal Reserve made long-term, zero-cost loans to all state and local governments in the US, taxpayers could save more than $160 billion a year in interest payments. What could this money pay for? A lot.
• $160 billion could help 13 million families avoid eviction by covering their annual rent.4
• $151 billion could provide all 31.5 million unemployed workers $600 a week in Pandemic Unemployment Assistance for eight weeks.5
• $134 billion could make up the revenue shortfall that every city, town, and village in the US is experiencing in 2020 due to the pandemic.6
• $66 billion could cover childcare expenses for all 5.1 families in the US with children under the age of 5 that currently pay for childcare.7
• Just $11.4 billion could cover the cost of extending Supplemental Nutrition Assistance Program (SNAP) benefits to all undocumented immigrants in the US for one year.8
• Just $6.5 billion could provide internet for distant learning to all 9 million students who currently lack internet access.9
A Broken System
The municipal finance system in the United States is irreparably broken by design. The big Wall Street banks that underwrite most municipal bonds have outsized power to set the terms of bond deals, and they typically do so in a manner that guarantees profits for themselves and for bondholders, at taxpayers’ expense. Furthermore, banks like Bank of America, JPMorgan Chase, and Citigroup that are major bond underwriters also have a long record of breaking state and federal antitrust and securities laws to enrich themselves.10 This means their profits are not merely unjustified, but that they are often also illegal.
However, financial staff for many state and local governments view and treat bond underwriters as de facto advisors, even though they are not legally required to put taxpayers’ interests above their own bottom line. In fact, the provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act that required municipal advisors to put taxpayers’ interests first created a loophole exempting bond underwriters.11
State and local governments pay a whopping $160 billion in interest payments on debt every year. Interest rates on debt are supposed to correlate with the borrower’s default risk. In other words, borrowers that are more likely to default on their debt are supposed to pay higher interest rates to compensate lenders for the higher risk that they will not get their money back. However, the risk of state and local governments (i.e., municipal borrowers) of not paying back their debt is virtually nonexistent.
According to Moody’s Investor Service, the cumulative ten-year default rate for municipal bonds between 1970 and 2019 was just 0.16%, compared with 10.17% for corporate bonds, meaning corporate bonds were a whopping 63 times more likely to default. In fact, the cumulative ten-year default rate for just Aaa-rated corporate bonds, which is Moody’s top rating that only 3% of its corporate bonds have attained, was 0.36%, more than double the default rate for all municipal bonds.12 In other words, municipal bonds as a whole were a safer investment than the safest 3% of corporate bonds.
One of the reasons that state debt is so safe is that federal bankruptcy law specifically prohibits states from filing bankruptcy, so bondholders of state debt are guaranteed repayment.13 Furthermore, municipalities are only allowed to file bankruptcy if permitted by the state, and only about half of the states have laws authorizing municipal governments to file bankruptcy.14 US municipal bonds are extremely safe investments, and the interest rates that most state and local government borrowers are forced to pay are unjustifiably high.
This is because Wall Street banks have found a way to commodify a basic piece of financial infrastructure that all state and local governments need to effectively manage their cash flow. Municipal borrowing is primarily intended to solve a liquidity problem: the government needs to spend a large sum of money now but wants to be able to space the payments out over a longer period of time, so it chooses to borrow. There is not a doubt that the money will eventually be there. It just does not have it on hand right now. The federal government could provide this financial infrastructure to state and local governments without spending a dime if the Federal Reserve would offer municipal borrowers long-term, zero-cost loans. However, because the Federal Reserve refuses to do this, taxpayers are at the mercy of the financial markets, which are designed to generate a profit for Wall Street banks and investors in municipal bonds.
Even if they are not legally allowed to file bankruptcy, rating agencies like Standard and Poor’s, Moody’s Investor Service, and Fitch Ratings will penalize cities and states for borrowing by giving them lower credit ratings. The major rating agencies have a long history of using credit ratings to push an austerity agenda and demand cuts to public services, and are rife with conflicts of interest that have made them bad at actually rating borrowers’ likelihood of defaulting.15 Moreover, they discriminate against municipal borrowers by giving them lower credit ratings than corporations that are significantly more likely to default.16
If Capital City wants to borrow $100 million, Capital City Bank might agree to give the city $100 million, in exchange for 20,000 I.O.U. notes. Each I.O.U. note is worth $5,000 and has to be paid back over 30 years with interest, at set periods of time. Capital City Bank can then turn around and sell these I.O.U. notes to 15 other investors.
Capital City now owes a total of $100 million, which has to be paid back with interest over 30 years to these 15 investors. In this case, the I.O.U. notes are bonds. Capital City Bank, which bought all the I.O.U. notes from the city at the onset in exchange for the $100 million with the expectation of selling them to other investors, is the bond underwriter. The 15 investors who bought the I.O.U. notes from Capital City are the bondholders, or the investors in the bonds.
Bond underwriters hold a lot of power because, as the initial buyer of the bonds from government borrowers, they get to set the terms of the deal, including the interest rate on the bonds. They claim the interest rate is based on what they believe they will be able to sell to potential bondholders, but ultimately, it us up to their discretion. Bond underwriters also charge fees for their services, and these fees typically get tacked onto the bond itself, which means municipal borrowers end up paying interest on those fees.
The top ten municipal bond underwriters in the US in 2019 were Bank of America (which underwrote $63 billion in municipal bonds), Citigroup ($44 billion), Morgan Stanley ($42 billion), JPMorgan Chase ($36 billion), the Royal Bank of Canada ($26 billion), Goldman Sachs ($22 billion), Wells Fargo ($18 billion), Stifel ($16 billion), Barclays ($15 billion), and Raymond James($14 billion).17
Bond underwriters use these lower credit ratings to demand higher interest rates from municipal borrowers, claiming that they will be unable to market and sell the bonds to investors unless they get paid more to offset the risk of nonpayment that the lower credit rating implies. However, this ignores the fact the credit ratings themselves are artificially deflated to make the risk seem far greater than it actually is.
This drains money out of communities of color in particular. White flight into the suburbs in the 1950s and 1960s depleted the tax bases of major cities that came to have larger concentrations of people of color. This resulted in lower credit ratings for those cities.18 Destin Jenkins, a history professor at the University of Chicago and author of the book, The Bonds of Inequality: Debt and the Making of the American City, describes the situation:
In the 20 years after World War II, a period of relatively low interest rates, local governments borrowed billions through the bond market. And yet, black children in cities around the country continued to attend underfunded schools. Streets went unpaved, and adequate parks and recreational facilities in black neighborhoods were hard to come by. This as in part the result of credit analysts seeing suburban bonds as more appealing.
By the late 1960s the will to address these inequities clashed with rising interest rates, outright racism, tax revolts and the power of credit rating analysts. New York City, Detroit, Boston, Baltimore and Cincinnati saw their bonds downgraded during the decade. Some thought the urban uprisings in these cities triggered a downgrade. Others stressed such long-term trends as white middle-class suburbanization and the urban concentration of low-income minorities.19
Today, state and local governments that serve above-average compositions of people of color are still more likely to get hit with lower credit ratings.20 This means that cities and states with higher concentrations of people of color are also more likely to be charged higher interest rates, since bond underwriters tend to set higher interest rates for bonds from borrowers with lower credit ratings. This diverts money that should be invested in high quality services in Black and Brown communities to bondholders instead.
Often, bond underwriters tell borrowers that they can attain lower interest rates if they use a variable-rate structure for their debt, in which the interest rates will fluctuate over time. This can present some savings on the front end if rates in the variable-rate market are currently low, but there is a risk that rates could spike later. To offset that risk, the bond underwriters will suggest that municipal borrowers use credit enhancements like bond insurance, letters of credit, standby purchase agreements, and/or liquidity facilities, and enter into side deals like interest rate swaps. Each of these financial products comes with its own set of fees that eat into the potential savings from using a variable-rate structure in the first place.21 Because variable-rate debt is typically resold at regular intervals when rates reset, borrowers also have to pay remarketing fees.22 Additionally, because it is a more complex deal, the underwriter can also charge higher underwriting fees.23
The underwriters that present these different options to municipal borrowers often end up serving as de facto financial advisors. However, because their primary business is underwriting and not advising, under a legal loophole, they are not required to put taxpayers’ interests above their firms’.24 However, they are still legally required to deal fairly with municipal borrowers, and accurately represent all risks to them25—an obligation they often fail to meet, in violation of state and federal securities laws.
For example, there is ample evidence that bond underwriters knowingly and systematically misrepresented how risky variable-rate debt deals with interest rate swaps were, in violation of the Municipal Securities Rulemaking Board’s fair dealing rule, costing taxpayers billions of dollars in losses when those risks materialized in the wake of the 2008 financial crash.26
Furthermore, the same banks that are major bond underwriters also have a record of collusion and bid-rigging in the municipal bond market. For example, several of the world’s largest banks, including Bank of American, JPMorgan Chase, and Citigroup, illegally manipulated the London InterBank Offered Rate (LIBOR),27 a benchmark interest rate that more than $300 trillion in financial instruments were based on, including the majority of municipal interest rate swaps.28 Several banks, including JPMorgan Chase and Citigroup, have pleaded guilty to criminal charges and paid billions in fines to financial regulators.29
In light of information from a whistleblower, the City of Philadelphia has also filed an antitrust lawsuit against major banks for manipulating the interest rates on variable-rate demand obligations, a type of variable-rate debt that bond underwriters often market to municipal borrowers. The whistleblower has filed lawsuits echoing these charges on behalf of California, Illinois, Massachusetts, and New York.30
The municipal finance system that exists today serves to transfer hundreds of billions of dollars every year from Main Street to Wall Street. This leads to deep cuts in essential community services like education, healthcare, and assistance for people who are unhoused or unemployed. For political expediency, these cuts are typically targeted toward services and programs that affect Black and Brown communities and poor families the most.
Creating a New System
A financial system that was designed to ensure that state and local governments had the money they needed to provide for healthy, thriving, and resilient communities would look nothing like the bond markets we have today. Our current municipal finance system is intentionally broken. It allows banks and investors to profit from pain and suffering in communities of color and poor neighborhoods. This is wrong. We can create a system that works for the benefit of all the people, not just handful of wealthy elites.
The Federal Reserve can flip this system on its head by making long-term, zero-cost loans directly to all state and local government borrowers in the United States. By lending to state and local governments directly without charging interest or fees, the Federal Reserve would save them the expenses of hiring financial advisors, paying fees to bond underwriters, and, most importantly, making interest payments to bondholders. As explained in the previous section, debt financing is an important part of financial infrastructure that all governments and government agencies need to provide high-quality services to communities. There is no reason for banks and bondholders to be able to profit from this basic piece of infrastructure if the Federal Reserve could do it for free.
The Federal Reserve could easily adopt regulations to ensure repayment of these loans and discourage overborrowing. For example, as a condition of lending, the Federal Reserve could stipulate that any borrower that misses a payment must levy an automatic tax on residents above a set income threshold to make up the payment.
Similarly, concerns that municipal borrowers might overborrow if they had access to free credit could also easily be addressed by putting borrowing limits into place. The borrowing limits should be set high enough to allow borrowers to refinance all of their existing debt and meet the new debt financing needs of the current fiscal year, and they should go up every year that a borrower is able to make all its payments on time.
The Federal Reserve has expressed concerns that lending to municipal borrowers would politicize the central bank since decisions about whether to lend to a particular borrower would inherently be wrapped up in state and local politics.31 The Federal Reserve could easily sidestep this issue by making loans indiscriminately to all state and local governments and government agencies that have not hit their borrowing limit.
Importantly, the Federal Reserve should do this, not only as an emergency pandemic response measure to help state and local governments get through the budget crises they are currently facing, but as a permanent, ongoing policy from this point forward. There is no reason for American taxpayers to pay banks and bondholders a dollar in interest and fees for every dollar that they borrow when the nation’s central bank could offer them loans directly without charging any interest or fees.
Long-term, zero-cost loans could save taxpayers across the United States and its territories more than $160 billion a year in interest payments. If California and New York State could refinance all of their existing debt into interest-free loans, it would save them more than $6 billion each and every year. Illinois, Massachusetts, and Connecticut would all save more than $1.5 billion a year. Texas, Washington State, and New Jersey would each save more than $1 billion a year.
The savings for major cities would also be large. New York City would save nearly $4 billion a year. Chicago and Los Angeles would each save more than $1 billion a year. Houston would save more than $550 million a year, Washington, DC would save $481 million a year, and Denver, Philadelphia, and Seattle would all save more than $200 million a year.
The potential annual savings for the complete list of states, counties, cities, school districts, public colleges and universities, and transit agencies that we have researched can be found in the Appendix.
These billions would go a long way towards funding essential services in communities across the country.
When There’s a Will There’s a Way
The Federal Reserve has long had the statutory authority to lend to municipal borrowers for a period of up to six months under the Federal Reserve Act.32 There is nothing preventing the Federal Reserve from rolling those loans over every six months to effectively mimic a long-term bond with a term of 30 or even 50 years. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) built on this by granting the Federal Reserve permission to make up to $500 billion in indefinite, long-term loans to municipal borrowers.33
The Federal Reserve has thus far refused to use this authority to the full extent permissible by law. After refusing to lend directly to cities, states, and territories for years, the central bank finally launched the Municipal Liquidity Facility (MLF) in response to the CARES Act. However, the Federal Reserve has severely limited the number of governmental bodies and agencies that are eligible to borrow from the MLF, it has arbitrarily chosen to limit the terms of those loans to no more than three years,34 and it originally charged borrowers interest rates so high that by 97% of municipal borrowers could get lower rates on the open municipal bond market.35 In response to criticism, the central bank has expanded eligibility criteria and lowered prices a little,36 but the rules are so strict and pricing so high that, as of September 17th, three-and-a-half months since the MLF launched, it has only closed on two loans,37 one to the State of Illinois and the other to the Metropolitan Transportation Authority in New York.
The current terms of the MLF are designed to discourage municipal borrowers from seeking loans from the Federal Reserve, but this ultimately undermines pandemic relief and economic recovery efforts. Long-term, zero-cost loans would allow more state and local governments to access loans from the Federal Reserve and make immediate investments into communities that have been battered by the heavy financial burden of the pandemic.
Meanwhile, in response to the pandemic, the Federal Reserve has offered the private sector more generous terms on corporate debt than it is offering to state and local governments on municipal debt. For example, through the Secondary Market Corporate Credit Facility, the Federal Reserve has offered to buy corporate bonds with terms of up to five years, compared to the three-year limit for the MLF.38 Even though the central bank’s programs to purchase corporate debt were intended to “limit the losses of jobs and incomes,”39 the Federal Reserve failed to put in adequate oversight provisions to ensure corporations actually used the money to keep workers employed. As the Washington Post reported in April 2020,
Unlike other portions of the relief for American businesses, however, this aid will be exempt from rules passed by Congress requiring recipients to limit dividends, executive compensation and stock buybacks and does not direct the companies to maintain certain employment levels.40
While the Federal Reserve has only made two loans to municipal borrowers under the MLF, it had purchased the bonds of more than 330 corporations as of July 10th, including Apple, Anheuser-Busch, Expedia, Verizon, AT&T, and Ford.41
Furthermore, in the aftermath of the 2008 financial crisis, the federal government made $10.4 trillion in bailouts and backstops available to the financial sector.42 The size of the entire US municipal bond market is just $3.9 trillion.43
The Federal Reserve’s actions clearly indicate where its priorities lie. But if the Federal Reserve wanted to extend this largesse to American taxpayers, it has all the authority it needs to fundamentally remake the municipal finance system into one that puts people before profit by making long-term, zero-cost loans available to all state and local government borrowers and government agencies.
Canceling Wall Street
Our existing municipal finance system is designed to extract wealth from communities of color and the poor. Debt financing is necessary for governments to be able to invest in long-term improvements like replacing lead water pipes, providing universal broadband internet access, and building new public schools and hospitals. However, when taxpayers pay a dollar in interest and fees for every dollar they borrow, the high cost of that debt becomes a burden on the Black, Brown, and poor communities that are forced to bear the greatest impact of cuts to public services.
Municipal finance is a critical piece of financial infrastructure. It is high time for the federal government to start treating it as such by providing all states, territories, local governments, and government agencies access to long-term, zero-cost loans. By taking Wall Street out of our municipal finance system, we could cancel our interest payments on bonds and free up more than $160 billion a year. Together with progressive revenue measures, this would give our governments the money they desperately need to ensure our communities can rebuild, thrive, and be ready for whatever the future may hold.
Potential Annual Savings to Municipal Borrowers from Long-Term, Zero-Cost Loans from Federal Reserve
State of New Mexico: $150 Million (2019)
1 Schwartz, Andrew. “The Realities of Economic Development Subsidies.” Center for American Progress. 01 Nov 2019.https://www.americanprogress.org/issues/economy/reports/2018/11/01/457771/realities-economic-develop ment-subsidies
2 “September 18, 2020 update from institute for Policy Studies and Americans for Tax Fairness: Billionaire wealth grew by $845 billion, or 29%, as America struggled through first six months of the pandemic.” Inequality.org. 18 Sep 2020. https://inequality.org/billionaire-bonanza-2020-updates
3 “Pandemic Profits Exposed: A COVID-19 Pandemic Profits Tax as one essential tool to reverse inequalities and rebuild better post-pandemic.” Oxfam America. 22 Jul 2020. 3. https://assets.oxfamamerica.org/media/documents/ Pandemic_Profiteers_Exposed.pdf
4 Based on the data from the United States Census Bureau’s 2018 American Community Survey, Table DP04 (Selected Housing Characteristics) that says that median rent in the United States is $1,023per month. https://data.census.gov/cedsci/table?d=ACS%205-Year%20Estimates%20Data%20Profiles&tid=ACSDP5Y2018.DP04
5 Shierholz, Heidi. “Half a year into the pandemic and millions of people are unemployed.” Working Economics Blog. Economic Policy Institute. 17 Sep 2020. https://www.epi.org/blog/half-a-year-into-the-pandemic-and-millions-of-people-are-unemployed-congress-must-provide-relief
6 McFarland, Christiana K. and Brenna Rivett. Fiscal Impact of the Pandemic Recession on Cities, Towns, and Villages. National League of Cities. 2020. 2. https://www.nlc.org/sites/default/files/users/user57221/Im pact%20of%20COVID-19%20on%20Cities%20Brief-Final.pdf ?_ga=2.162775157.894125177.1589981740- 1075301927.1589981740
7 Malik, Rasheed. “Working Families Are Spending Big Money on Child Care.” Center for American Progress. 20 Jun 2019. https://www.americanprogress.org/issues/early-childhood/reports/2019/06/20/471141/working-families- spending-big-money-child-care
8 Average monthly cost of SNAP benefits is $287 (Rosenbaum, Dottie, Stacy Dean, and Zoe Neuberger. “The Case for Boosting SNAP Benefits in Next Major Economic Response Package.” Center for Budget and Policy Priorities. 22 May 2020. https://www.cbpp.org/research/food-assistance/the-case-for-boosting-snap-benefits-in-next-major-economic-response-package); there are an estimates 10.5 million undocumented immigrants in the US (Passel, Jeffrey S. “Measuring illegal immigration: How Pew Research Center counts unauthorized immigrants in the U.S.” Fact Tank. Pew Research Center. 12 Jul 2019. https://www.cbpp.org/research/food-assistance/the-case-for-boosting-snap-benefits-in-next-major-economic-response-package); and the average US household size is 2.63 (Fry, Richard. “The number of people in the average U.S. household is going up for the first time in over 160 years.” Fact Tank. Pew Research Center. 01 Oct 2019. https://www.cbpp.org/research/food-assistance/the-case-for-boosting-snap-benefits-in-next-major-economic-response-package).
9 “More than 9 million children lack internet access at home for online learning.” USA Facts. 06 Apr 2020. https://usafacts.org/articles/internet-access-students-at-home; Blumenthal, Eli. “Internet bill too high? Here’s how to save.” USA Today. 08 Jan 2018. https://www.usatoday.com/story/money/personalfinance/budget-and-spend ing/2018/01/08/internet-bill-too-high-heres-how-save/429890001
10 There are numerous documented instances of major banks illegally dealing with municipal borrowers. The articles listed as sources are just a small handful of examples: Hilzenrath, David S. “J.P. Morgan charged with rigging municipal bonds.” Washington Post. 07 Jul 2011. https://www.washingtonpost.com/business/economy/jp-morgan-charged-with-rigging-municipal-bond-deals/2011/07/07/gIQAlRQA2H_story.html; Orol, Ronald D. “Bank of America settles muni-market fraud charges.” MarketWatch. 07 Dec 2010. https://www.marketwatch.com/story/bank-of-america-settles-muni-market-fraud-charges-2010-12-07; “Tracking the Libor Scandal.” New York Times. Updated 23 Mar 2016. https://www.nytimes.com/interactive/2015/04/23/business/dealbook/db-libor-timeline.html#/#time370_10900
11 Underwood, Wendy R. “The Dodd-Frank Act and Municipal Advisor Rules.” The National Law Review. 20 Jan 2014. https://www.natlawreview.com/article/dodd-frank-act-and-municipal-advisor-rules
12 US municipal bond defaults and recoveries, 1970-2019. Moody’s Investor Service. 15 Jul 2020. 10. https://www. moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1233833
13 Katkin Kenneth. “3 Questions on State Bankruptcy.” The Council on State Governments E-Newsletter. Jul-Aug 2017. https://www.csg.org/pubs/capitolideas/enews/issue65_3.aspx
14 Maciag, Michael. “Municipal Bankruptcy State Laws.” Governing. 25 Jan 2013. https://www.governing.com/gov-data/state-municipal-bankruptcy-laws-policies-map.html
15 Bhatti, Saqib and Carrie Sloan. Our Kind of Town: A Financial Plan that Puts Chicago’s Communities First. Re Fund America Project and the Roosevelt Institute. 24 Mar 2015. 5. https://acrecampaigns.org/wp-content/up loads/2020/04/OurKindofTown-Mar2015.pdf
16 US municipal bond defaults and recoveries, 1970-2019, op. cit.
17 Weitzman, Aaron. “Top muni underwriters of 2019.” The Bond Buyer. 08 Jan 2020. https://www.bondbuyer.com/ list/top-municipal-underwriters-of-2019
18 Jenkins, Destin. “The Fed could undo decades of damage to cities. Here’s how.” Washington Post. 27 Apr 2020. https://www.washingtonpost.com/outlook/2020/04/27/fed-could-undo-decades-damage-cities-heres-how
20 Yinger, John. “Municipal Bond Ratings and Citizens’ Rights.” American Law and Economics Review 12, no. 1 (2010): 11-15. http://www.jstor.org/stable/42705565; Outlook Negative: How Ratings Agencies Punish Local Governments, Create Huge Profits for Wall Street, and Leave Public Employees and People of Color Holding the Bag. ReFund America Project and the Action Center on Race and the Economy. May 2017. 12. https://acrecam paigns.org/wp-content/uploads/2020/04/OutlookNegative-May2017.pdf
21 Bhatti, Saqib and Carrie Sloan. Turned Around: How the Swaps that Were Supposed to Save Illinois Millions Be came Toxic. Jan 2016. 15-17. https://acrecampaigns.org/wp-content/uploads/2020/04/TurnedAround-Jan2016.pdf
22 Ibid, 17.
23 Corkery, Michael and Mike Cherney. “Banks Rack Up Big Fees From Puerto Rico Bond Deals.” Wall Street Journal. 22 Oct 2013. https://www.wsj.com/articles/banks-rack-up-big-fees-from-puerto-rico-bond-deals-1382491664
24 Underwood, Wendy R. “The Dodd-Frank Act and Municipal Advisor Rules.” The National Law Review. 20 Jan 2014. https://www.natlawreview.com/article/dodd-frank-act-and-municipal-advisor-rules
25 “Excerpt from Notice of Application of MSRB Rules to Solicitor Municipal Advisors: Conduct of Municipal Securities and Municipal Advisory Activities, Rule G-17.” Municipal Securities Rulemaking Board. 04 May 2017. Accessed 20 Sep 2020. http://www.msrb.org/Rules-and-Interpretations/MSRB-Rules/General/Rule-G-17.aspx?tab=2
26 Gillers, Heather and Jason Grotto. “Banks kept CPS in shaky bond market.” Chicago Tribune. 10 Nov 2014. https://www.chicagotribune.com/investigations/ct-chicago-public-schools-bonds-banks-met-20141107-story.html
27 Kagan, Julia. “The LIBOR Scandal.” Investopedia. 29 May 2020. https://www.investopedia.com/terms/l/libor-scandal.asp
28 Hou, David and David Skie. LIBOR: Origins, Economics, Crisis, Scandal, and Reform. Federal Reserve Bank of New York Staff Reports, no. 667. Mar 2014. https://www.newyorkfed.org/medialibrary/media/research/staff_re ports/sr667.pdf
29 Freifeld, Karen. “Five global banks to pay $5.7 billion in fines over rate rigging.” Reuters. 20 May 2015. https://www.nytimes.com/interactive/2015/04/23/business/dealbook/db-libor-timeline.html#/#time370_10900
30 Mysak, Joseph, Jr. “How Philadelphia Says It Got Ripped Off by Bank Bond ‘Robots’”. Bloomberg. 08 Mar 2019. https://www.bloomberg.com/news/articles/2019-03-08/how-cities-say-bank-bond-robots-ripped-them-off-quick take
31 “Why doesn’t the Federal Reserve lend to state and local governments?” Board of Governors of the Federal Reserve System. 16 Dec 2015. Accessed 20 Sep 2020. https://www.federalreserve.gov/faqs/money_12658.htm
32 The Federal Reserve Act. 12 U.S.C. §§ 221-522. https://tile.loc.gov/storage-services/service/ll/uscode/us code1946-00101/uscode1946-001012003/uscode1946-001012003.pdf
33 Public Law No: 116-136, Sec. 4003. https://www.congress.gov/bill/116th-congress/house-bill/748/text?overview=closed
34 Municipal Liquidity Facility Term Sheet. Board of Governors of the Federal Reserve System. 11 Aug 2020. https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200811a1.pdf
35 Aiming to Underachieve: How a Federal Reserve Lending Program for Local Governments is Designed to Fall Short. Fed Up. Jun 2020. 1. https://populardemocracy.org/sites/default/files/Aiming%20to%20Underachieve%20 -%20Fed%20Up%20White%20Paper%20June%202020.pdf
36 “Federal Reserve Board announces revised pricing for its Municipal Liquidity Facility.” Board of Governors of the Federal Reserve System. 11 Aug 2020. https://www.federalreserve.gov/newsevents/pressreleases/mone tary20200811a.htm
37 Gillers, Heather. “Lawmakers Tangle Over Fed’s Muni-Market Rescue.” Wall Street Journal. 17 Sep 2020. https://www.wsj.com/articles/lawmakers-tangle-over-feds-muni-market-rescue-11600365085
38 Secondary Market Corporate Credit Facility Term Sheet. Board of Governors of the Federal Reserve System. 09 Apr 2020. https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200409a2.pdf
39 “Federal Reserve announces extensive new measures to support the economy.” Board of Governors of the Federal Reserve System. 23 Mar 2020. https://www.federalreserve.gov/newsevents/pressreleases/monetary20200323b.htm
40 Stein, Jeff and Peter Whoriskey. “The U.S. plans to lend $500 billion to large companies. It won’t require them to preserve jobs to limit executive pay.” Washington Post. 28 Apr 2020. https://www.washingtonpost.com/busi ness/2020/04/28/federal-reserve-bond-corporations
41 Saphir, Ann and Jonelle Marte. “Fed adds Apple, Anheuser-Busch, Expedia to its bond holdings.” Reuters. 10 Jul 2020. https://www.reuters.com/article/us-usa-fed-bonds/fed-adds-apple-walt-disney-and-other-bonds-to-credit-portfolio-idUSKBN24B2A5
42 Prins, Nomi and Krisztina Ugrin. Bailout Tally Report. 03 Mar 2010. https://www.sitemason.com/files/foZeWA/ bailouttallymar2010.pdf
43 Muni Facts: Municipal Market by the Numbers. Municipal Securities Rulemaking Board. 2020. http://www.msrb. org/msrb1/pdfs/MSRB-Muni-Facts.pdf