Making Muni Magic Disappear

Twenty years ago, the municipal bond market was -- believe it or not -- a wild and crazy kind of place. At least, that was ...
December 4, 2006

Twenty years ago, the municipal bond market was -- believe it or not -- a wild and crazy kind of place. At least, that was the U.S. Congress's take on it, with the result that the Tax Reform Act of 1986 clipped the wings of state and local agencies that issued municipal bonds.

The effects of that act on municipal financing was my first big story for Governing. Issuers could no longer come to the market with bonds for the sole purpose of placing the proceeds in high-return investments. They could no longer issue debt for uses that sorely tested the limits of the tax-exemption privilege. Over the years, I've watched and reported on various federal investigations, SEC fines and additional legislation that have further tamped down that "creativity."

It struck me the other day just how tame -- possibly marginalized -- the muni market has become when SIFMA was born.

SIFMA is the new powerhouse lobbying group that represents a merger of associations representing the sellers of stocks and bonds. The bond half of SIFMA was the Bond Association, an association representing underwriters of corporate, municipal and various other forms of government debt. I received regular email updates from the Bond Association on issues of importance. I had to search for news about muni bonds -- in the emails on their Web site. Which struck me as passing strange since the Bond Association had once been the Public Securities Association. In 1997, the name was changed to reflect a wider-ranging membership -- heavier on corporate than the state and local government debt.

So the Public Securities Association, which had represented underwriters whose meat and potatoes was the muni market, was subsumed into a greater association. And now, that's what's happened to the Bond Association. It's part of SIFMA -- the Securities Industry and Financial Markets Association -- and news of and information about the muni market is even harder to find. And that's so, even though the co-CEOs of the new association are PSA alumni: Marc Lackritz, who had headed up PSA until he moved on to the Securities Industry Association, and Micah Green who then took over the helm of the now all-but-forgotten PSA.