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Bad bank deals hurt transit agencies. I wish the cited article in dc.streetsblog had interviewed Metro about why they made the bad deals.

Public works agencies reasonably would sell both fixed rate bonds and some variable rate bonds. But if they wanted to be protected from interest rate swings, why purchase expensive instrument to edge? Just issuing more fixed rate bonds and fewer variable rate bonds would have been the obvious solution. Did WMATA management think it could outsmart the market by engaging in a sophisticated arbitrage? It sounds like WMATA was just making a bet on interest rates and they bet wrong.

The article's suggestion that transit agencies should not pay their obligations because others who gambled and lost were bailed out is incredibly lame. Instead, DC.Streets should be asking the officials who made the deals to explain themselves, and if any of them still work for Metro, WMATA management should be asked why.

by Jim T on Jun 11, 2012 9:31 am • link • report

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