A reporter's job is to ask tough questions.

Sometimes, nobody calls on a reporter because they know he has a tough question, and sometimes the people he asks know enough to duck. But the reporter has to ask anyway, if he's doing his job, and if he likes to get a good night's sleep.

I still have a few questions that, for one reason or another, I'd like to ask.

I was at a conference recently where I asked a panelist about derivative products and, in particular, interest products and, in particular, interest rate swaps. During his presentation he said that an issuer must rely on his underwriting or financial adviser, and decide for himself, "Is this swaps transaction appropriate?"

He continued, "This is not all that slick, and not all that complicated. Listen to your instincts. Don't listen to what you want to believe."

He also noted that there would be "problems in the market," but that they woundn't be significant. I asked him what those problems were. He answered, but he didn't answer. The real question, it seems, is: Are swaps appropriate for most issuers, if we say "most" issuers are unsophisticated?

On Government Hounding

Or consider the story we carried last week, "Treasury, IRS Officials to Review Curbing Call-Waiver Bonds Despite Cottage Ruling."

The story recounted how that monolithic body, IRSTreasuryCongress, intends to take a closer look at something called "call-waiver" bonds, despite a Supreme Court ruling on a related a Supreme Court ruling on a related subject, Cottage Savings Association v. Commissioner of Internal Revenue, that nobody can understand, let alone write about in one simple sentence.

I asked myself the question first, "Call-waiver bond? What's that? I've written a book about bonds, and I've never heard of them."

Well, you might have asked that question, too, because there are no such things as call-waiver bonds. They are creations of the secondary market, where dealers buy a bond issue, negotiate with the trustee and issuer, and essentially escrow the bonds to maturity. The bonds become more valuable, the issuer gets a little cash for his troubles, bond calls are waived, and the dealer make a little cash selling these now more-valuable -- because they are noncallable -- bonds to investors.

The question by the monolithic body that likes to stick it to the municipal market every once in a while becomes, "Have the dealers made the terms of these bonds materially different?" Because if they have, these bonds are deemed to be "reissued" and subject to current, more restrictive tax law. Someone will have to pay.

Now, such things as call-waiver bonds are not exactly rare. There are dozens of small issues that are being turned into "call-waiver bonds" and the like by all kinds of dealers who, locked out of big deals in the primary market, have found that they can make some money in this brainy fashion in the secondary.

The real question here is: How far can the Government go in hounding the secondary market, and those who do business in it?

On Connie Lee

A couple of weeks back, the College Construction Loan Insurance Association -- Connie Lee for short -- entered the ranks of the primary municipal bond insurers.

Connie Lee, originally created by Congress in 1986, is now 50% owned by private investors, 35% by the Student Loan Marketing Association, and 15% by the U.S. Department of Education. It has a federal mandate to insure only those credits rated below the top three tiers of credits.

The top three are A and above, and most bond insurers don't like to dip into those credits rated below.

For some time, insurers have questioned the presence in their market of an entity that has what might be called the perceived backing of the federal government.

Will it serve a quasi-public purpose and help colleges with lower ratings tap the market, or willit go after the entire school market? In so doing, will it drive out private capital from the market?

These are the big questions, and so far, they remain unanswered. The real question is: What will Connie Lee add to the market except more competition and more "market-share" pricing?

On the Battlefield

Finally, between 9:00 and 9:15 last Tuesday morning, an eerie confluence of events produced the postponement of $3.3 billion in bond issues.

Of course, nobody knew it at the time, and I put out an all-hands alert as reporters scrambed to find out whether what was happening was happening because of one single event in the market -- something along the lines of an atomic blast at Merrill Lynch and Goldman Sachs.

The Munifacts alarms were going off, telephones were ringing, and there was lots of shouting. This was not a drill.

These are the times editors feel like those Civil War generals who surveyed battlefields wreathed in hellfire and wondered precisely what was going on.

So, how is it that precisely at that time, I received a battery of calls that had absolutely nothing to do with the situation?

One friend called and asked if I had heard the joke Sen. Bob Kerrey was heard telling over C-Span.

Someone else called and asked how to get an obituary over the newswire.

Still a third called wanting to know the last time we ran a story on, can you imagine, Connie Lee.

And onother wanted to know how to take a look at the past issues.

All well and good, and I am always pleased to answer anyone's questions. The customer is always right. But the question from me is:

Why weren't you guys watching the market?

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