Financial crisis hits Durham County bond market efforts

A sign of just how far the financial crisis in America's debt and equities markets has spread, from today's N&O:

In the past two weeks, Wake County delayed plans to sell $454.5 million in bonds, while Durham County's attempt to borrow $30 million failed because no lenders bid on the offering.

Their struggles are notable because both counties enjoy the highest AAA credit rating -- meaning they are among the safest institutions to lend money to.

Ruffin noted that the county successfully levied $60 million in bonds this spring, and expects to find a buyer for its issue this time around, too -- but likely at less favorable rates as before.

The market disruption comes as the county is on the verge of Durham's levying a total of $130 million to support the forthcoming construction of the downtown justice center to replace the old courthouse and for the human services building. Ruffin notes to the N&O that the county will parcel out the debt into smaller chunks to be more attractive to borrowers.

Comments

[chris]

Does a AAA credit rating really mean anything now? I thought that the total failure of those bond/credit rating agencies was a big part of this financial crisis.

Are we really as credit-worthy as these rating agencies think we are? It's a question investors are asking. Maybe we should be asking that question of ourselves too . . . .

[Michael Bacon]

I don't think the credit rating agencies had much fault in this. Many of the failed assets were ones that the credit rating agencies deemed very risky.

[Chris Bozzelli]

The credit rating agencies have been accused of providing ratings that didn't adequately asses the risk involved in mortgage backed securities - subprime stuff again. I have yet to hear of specific issues with municipal bond ratings, though.

http://www.iht.com/articles/2007/05/31/bloomberg/bxinvest.php

[chris]

Well, something is going on. Lots of investors are parking their money in t-bills right now. This report seems to prove that investors are not parking their money in municipal bonds, even with the tax advantage. You would think that municipal bonds would be looking pretty good at this moment.

Hold on. This could be a rocky ride.

[Justin Y]

While there is definitely dislocation in the credit markets, I don't think the solution is the horrendous $700 billion bailout of the financial industry that Congress is about to approve. Besides saddling the country with huge debts (read: mostly likely a lot of inflation later on), the moral concept of bailing out giant financial institutions with tax payer money makes me want to wretch.

Once again, Democrats in Congress are showing they have no backbone even against an unpopular Bush administration.