Exotic School Bond Financing

[BaalsTears]

Have you ever seen a shark take a seal. It's an amazing sight. Something like that is beginning to happen in some public school districts in California. School administrators and the unions are taking the future in order to nourish the present. The schools along the California coast and most of the rest of the state are under the control of leftist ideologues and their union allies.

They have created a new type of financing called "Capital Appreciation Bonds" in which interest accrues but isn't paid for at least twenty years so the bond indebtedness isn't amortized over the entire term of the financing. That protects the current taxpayers at the expense of future taxpayers most of whom either aren't in existence or at this stage of life are minors. The youngsters are the ones who will pay.


"...The Poway Unified School District may be California’s poster child for exotic school bond financing, but it is by no means alone in San Diego County.
As I detailed in my story yesterday, Poway Unified borrowed $105 million last year using a form of financing called a capital appreciation bond. The district won’t start making payments on the loan until 2033, and by the time it’s paid off in 2051, taxpayers will have paid back almost $1 billion, or almost 10 times the original loan.
As I point out in my story, capital appreciation bonds have become increasingly popular across the state, since they allow school districts to borrow money now without raising taxes on current residents. Instead, the burden for paying for the bonds is pushed to future generations, who are left on the hook for loans that are wildly more expensive than conventional bonds..."

http://www.voiceofsandiego.org/educa...a4bcf887a.html

 

[coldstream]

There are horror stories that have appeared about exotic financing initiatives... most notably in the heyday of the mortgage swaps and cdo's, of cities that had been given glitzy sales pitches by Wall Street Banks, about how they could cure all their problems through creative debt derivative instruments.

The truth was they were so complex that neither the buyer or the seller understood what they were.. or what the risks were. They were developed by 'quants' who used sophisticated interdependent arbitraging schemes based on certain market conditions.. that turned out to be lethal weapons of mass financial destruction.. when the housing market collapsed.. throwing the cities into bankruptcy... now.. not in 30 years.

My guess is these cities still don't know what they're getting themselves in for... and there are looming shocks on the horizon.. Europe.. but its coming here. America, Canada could resemble Spain in 5 years.

But even if they were as benign as they seem... they ignore the fundamental origins of the financial crisis... and that is the collapse of the integrated industrial national economy.. of America.. Canada. Unless that is re-established.. and that can only be done by ditching the dragons of Neo-Liberal economics... Free Trade, Monetarism, De-regulation, Privatization, Regressive Taxation... then NOTHING will stave of a progressive economic implosion..

Even in the Great Depression we did not have cities going bankrupt.. unable to provide basic services.. police, fire, road repair, sewer maintenance.. which means we are facing much deeper and insoluble problems than existed in the 30s. AND no one out there in the political establishment.. Republican or Democrat.. is willing to acknowledge that. In fact both are equally complicit in its implementation.

 

[damngrumpy]

I love the line the leftists and their allies the unions. Not all union members are
leftists. In fact I know a trade union guy who is running for the conservative
nomination for the provincial election. That being said, the idea is not altogether
a leftist idea. And I think some people would be shocked at how much the union
pension funds own and who does the management of them
Toronto Maple Leaf fans, your team is owned primarily by union pension funds.
There are entire housing complexes owned by the telephone workers union and
those assets are approaching billions.
Guys like Furlong are the people who manage the operation and low and behold
they are big time Liberals and conservatives.
While people like you and I hurl words like left and right at each other the people
pulling the strings work together so they can all line up with their profits at the
bank of profit.
I know some people who are New Democrats who are more conservative than some
of the liberals in power. In fact left and right is not encompassed in a party its a
personal thing in many cases. Am I left of center, damn right, about many things yet
I am very right wing on other issues and probably more right than most in some cases.
Now the scheme being proposed here has a whole series of problems but it does not
come close to the derivatives out there that contain about a trillion dollars of potential
debt that was invented by right wing business interests and could sink the entire financial
system of the world. Oh notice I said right wing business interests? If we had decent
government right wing and left wing business interests would be called to account for
under handed programs period

 

[BaalsTears]

America is so intent on a race to the bottom that any reindustrialization of the country will probably involve robots, software, and illegal aliens. What Americans need more than anything else are good paying jobs. The only way to create those jobs in the near term is to turn to resource extraction, but that's a lower level of development. The alternative for Americans is accept the dire straits of Spaniards, Greeks and Italians. I haven't included Canada in the same boat as America because I like to think that there's some place where things will work out.

I love the line the leftists and their allies the unions. Not all union members are
leftists. In fact I know a trade union guy who is running for the conservative
nomination for the provincial election. That being said, the idea is not altogether
a leftist idea. And I think some people would be shocked at how much the union
pension funds own and who does the management of them
Toronto Maple Leaf fans, your team is owned primarily by union pension funds.
There are entire housing complexes owned by the telephone workers union and
those assets are approaching billions.
Guys like Furlong are the people who manage the operation and low and behold
they are big time Liberals and conservatives.
While people like you and I hurl words like left and right at each other the people
pulling the strings work together so they can all line up with their profits at the
bank of profit.
I know some people who are New Democrats who are more conservative than some
of the liberals in power. In fact left and right is not encompassed in a party its a
personal thing in many cases. Am I left of center, damn right, about many things yet
I am very right wing on other issues and probably more right than most in some cases.
Now the scheme being proposed here has a whole series of problems but it does not
come close to the derivatives out there that contain about a trillion dollars of potential
debt that was invented by right wing business interests and could sink the entire financial
system of the world. Oh notice I said right wing business interests? If we had decent
government right wing and left wing business interests would be called to account for
under handed programs period

In a lot of ways you are right about unions. I shouldn't include private sector unions in the same category as public sector unions. Private sector unions in the West have served to mitigate the excesses of Private Capital. But the public sector unions in California aren't dealing with Private Capital. They're dealing with taxpayers who are not here to exploit labor. When I started out in life it was in a blue collar family. Look at me now...right wing blow hard. Life's journey takes us into strange places.