Theft at the Public Till
issue tax-exempt bond offerings for nonprofit groups. These authorities don’t actually borrow the money. They merely serve as conduits for the real borrower-the hospital, college, or nonprofit institution that runs the project once it is built and is responsible for paying back the debt. Instead of turning to private money markets, where they would have to pay higher commercial interest rates on the money they borrow, nonprofit groups are able to turn to their own private market for raising capital. The lower financing costs can result in savings of millions of dollars in interest. Most state officials concede that they have little control over these many authorities, let alone regulate them. Oversight is so loose that many authorities don’t bother to send copies of their annual report and audited financial statement to the state government. In most states, no state agency in any sense is really con- trolling the authorities. They establish their own rules, set their own rates and have their own priorities. They will never admit the real explanation for the lack of oversight is politics. “Its is a bit like buying a stereo system. If you get a better CD player the defects in the amplifier show up, so you buy a better amplifier, and then the speakers won’t handle it, so you rush down to the store with your credit card and buy such a fantastic set of speakers that it is ridiculous to keep using the old CID player. Everything co-evolves with everything else, in the direction of increasing expenditure...” Future Tense by Ian Morrison and Greg Schmid The problems in municipal finance stem from the fact that elected poli- ticians are in a position to dole out lucrative municipal business - the selling of bonds to build dormitories, bridges and roads, among other things. Until recently, municipal finance -bankers could contribute to local political cam- paigns. That has been halted, but the ability remains to befriend politicians and influence their decisions about who on Wall Street gets to sell the bonds. As long as major securities firms were able to make big campaign con- tributions to the local and state officials with whom they do business, the $1.2-trillion municipal bond industry was fraught with potential for scandal. In Florida, Massachusetts, New York, New Jersey and elsewhere, the cozy
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