WASHINGTON -- The Securities and Exchange Commission has asked the New York Stock Exchange to conduct an inquiry to determine whether its members have heavy concentrations of New York City or Philadelphia bonds, the commission's chairman, Richard Breeden, said this week.
Mr. Breeden was responding to a May 23 letter from Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee's subcommittee on securities, who warned that a bond default by a major city could have serious consequences for investors, broker dealers, and the bond market in general, particularly in the current economic environment.
But Mr. Breeden said in an Aug. 12 letter to Sen. Dodd that the strength of the nation's municipal market has not been severely harmed by current fiscal problems in New York, Philadelphia, and Bridgeport, Conn.
"The federal bankruptcy filing by the city of Bridgeport reinforced concern about the financial condition of governmental issuers in various areas of the country," wrote Mr. Breeden. "However, it does not appear that the problems experienced by the cities of New York or Philadelphia, or the Bridgeport filing, have significantly affected the overall strength of the municipal bond marekt."
Mr. Breeden noted, however, that the "resilience of the market should not serve to minimize the harm that any default would cause to the communities and investors that are directly affected."
"Cities and states in virtually every region of the country are under severe fiscal stress," Mr. Dodd wrote in his letter to the SEC. "It's absolutely imperative that we give special attention to the nation's bond market as problems in Bridgeport and a number of cities around the country appear to be worsening."