I would like to share with you a few thoughts about our industry from an issuer's perspective. I happen to have a high level of confidence in the integrity of the market. Since I have knowledge primarily of happenings in New York State, my knowledge of the municipal industry nationwide comes from trade publications and industry sources.
With more than 15,000 municipal issues sold annually and literally billions of dollars of transactions taking place every year in the primary and secondary markets, the fixation on a handful of alleged wrongdoings does not in my mind create a crisis of confidence in the bond market.
In the authority's 1994 fiscal year, we marketed 40 issues for a dollar amount of almost $5 billion. In every one of these deals, the market was efficient and responsive.
How do we know?
We check on lead underwriters' pricing - we get calls from fund buyers when a pricing is too cheap or too rich. Over the years, we have developed a very good rapport with the market, and it works very well for us.
There are a number of issuers in New York State that perform in different programmatic areas, and their performance attests to the efficiency of the market and its responsiveness. The industry is self-regulated. The Public Securities Association, the Municipal Securities Rulemaking Board, and the Securities Exchange Commission all have a defined role and function to perform, and they do it very well. But they do it by talking to each other, not to the public.
I was watching on C-Span television the other night a congressional hearing on the tobacco industry. I was amazed at the united front shown by the tobacco industry refuting claims made at the congressional hearings. The CEOs of twelve major corporations and representatives of the tobacco growing states steadfastly maintained that nicotine is not addictive and the corporations that make cigarettes are doing nothing wrong.
Surely we can do the same for an industry that helps people, not harms them.
I would like to see the municipal bond industry do the same thing. I see an emerging parallel between the bond business and the tobacco industry. New York City, as the financial center of the world, compares to North Carolina in the tobacco industry. Should not our industry present a united front showing the good that is accomplished by municipal bonds?
Shouldn't the industry steadfastly refute the claim that the tax-exempt nature of our bonds in an unfair subsidy by the federal government to colleges, universities, hospitals, research organizations, nursing homes, housing for the elderly, voluntary not-for-profit agencies that educate citizens with special needs, and a host of agencies that provide a public good by financing with tax-exempt bonds?
How can governments continue to try to restrict legitimate projects for the public good while allowing McDonald's, K-Mart, and many other very profitable organizations almost unfettered access to tax-exempt financing? So we must begin to explain to the public the honesty and efficiency of our industry.
But our industry has a second challenge. It is linked to government and the public's view of us. It depends on whether the public believes government is using us - i.e. borrowing money - for good reasons.
There was a time when governments borrowed money for a specific purpose - a college, a bridge, a road, a water system, a research facility, a transportation system, and many more projects for the good of the public. It seems to me now, as I look at all forms of government borrowing, that in most cases the reason for borrowing money - i.e. incurring debt - is not at all clear.
Certainly, federal government borrowing meets this conclusion. Let me state again, I have a high level of confidence in the integrity of the market with our system of government, focusing on the election and judicial processes. The industry is doing an outstanding job.
I suggest that we not dwell so much on the negatives and focus more on the positive things this industry has accomplished with a high degree of professinalism. In this self-regulated industry, an enlightened self-interest coordinating an industry response to the challenges facing all of us today is the proper approach.
There is nothing inherently wrong with our industry, and I am fearful that an overreaction to a very few alleged wrongdoings will cause irreparable harm to our industry and give the federal government ammunition to further curtail the tax-exempt market that is doing so much good.