Municipal Bonds: The Rating Game
Local cities and states have finally woken up to the way in which they are systematically fleeced by the rating agencies. Bill Lockye, the Californian Treasurer, is leading a campaign to change the way in which their bonds are rated.
Often they are rated poorly which then requires a nice fat insurance payment on top. This simply transfers more taxpayer funds to the financial sector.
Ok so it’s just another racket but what I like about this is the awakening from local financial institutions and the realisation that they can do things a bit differently.
What is to stop local governments from issuing their own bonds to their own people for local projects? Take that a step further and what’s to stop them from issuing their own local currency.
The current crisis is helping many people to see through some of the smoke and mirror charges imposed in the course of financial transactions and the system is becoming more transparent as “special purpose” structures and entities are revealed to be nothing more than methods to add on commissions and fees as many times as possible.
One possible solution that I’ve read about was proposed to solve the problem of US pork barrel politics negatively effecting the maintainance of public infrastructure, which had disastorous consequences in the case of the Massachusetts bridge collapse last year. Its one I found really interesting at the time and could relate well to your idea of local governments directly funding public infrastructure.
“One possible solution is to turn each state road system into a non-profit corporation funded entirely from tolls not taxes. The stockholders in the corporation would be the road users. They elect a board to run the roads and determine road spending and tolls. Funds can not be diverted to other vanity projects since all funding belongs only to the road corporation. And the only source for funding would be the tolls not taxes subject to political control.”
“Instead have a privately owned entity whose stockholders are the people who actually pay for the services. They pay in the revenue and receive back any surpluses. They are free to hire management companies to run the roads in a competitive manner and can fire any company that botches up the system.”
http://freestudents.blogspot.com/2007/08/politics-bridges-and-one-possible.html