Treasury officials plan to meet soon with state and local government associations to develop ways to promote sound investment practices.
The planned session was prompted by the financial crisis afflicting Orange County, Calif., said Darcy Bradbury, deputy assistant treasury secretary for federal finance.
Bradbury declined to say exactly when the meeting would be held with the representatives of nine groups, including the National Association of State Treasurers, the National League of Cities, the U.S. Conference of Mayors, and the Government Finance Officers Association.
Treasury officials had hoped to convene a meeting as early as this week, but coordinating the schedules of all of the participants makes that unlikely, several prospective attendees said.
At the meeting, expected to be the first of a series, officials hope to review the work of each invited group regarding investment policies. Many of the nine groups have already drafted investment policies or have done studies on the formation and operation of investment pools.
Treasury officials hope to find ways to promote sound investment practices by state and local governments in order to avoid the sorts of fiascoes that have occurred in Orange County, as well as in such other areas as San Jose, Calif., and West Virginia, Bradbury said.
While the Treasury can enact regulations governing the activities of dealers, it has virtually no direct authority over state and local governments, Bradbury said.
Last year, the president signed changes to the Government Securities Act, which gives securities and banking regulators the authority to set sales practice rules for dealers that sell government securities. The rules would also apply to the sale of government agency-issued structured notes.
The National Association of Securities Dealers is also drafting sales rules. In addition, banking regulators are drafting government securities sales practices rules, which would include suitability standards. An official in the comptroller's office has said he hopes rules will be out in the first part of 1995.
Bradbury said this examination of municipalities' investment policies and practices does not reflect a change in the Treasury's position that legislation is not immediately needed to regulate the derivatives markets.
"We have not yet found the need for broad new legislative authority," Bradbury said. "At this time, we feel we have sufficient statutory authority to address them," she added.
A tentative list of state and local government representatives expected to attend the meeting includes Stacy Crane, executive director of the Municipal Treasurers Association; Betsy Dotson, assistant director for the federal liaison center of the GFOA; Jim Krouse, acting Washington office director of the National Association of State Auditors, Comptrollers, and Treasurers; Tim Masanz, group director, economic development and commerce, National Governors Association; Christine Milliken, executive director and general counsel, National Association of Attorneys General; Frank Shafroth, director of policy and federal relations, NLC; Edward Somers, assistant executive director, U.S. Conference of Mayors; Reginald Todd, legislative director, National Association of Counties; and Milton Wells, director of NAST.
The gathering is being organized by the Treasury on behalf of the President's Working Group on Financial Markets.
The Working Group on Financial Markets is chaired by outgoing Treasury Secretary Lloyd Bentsen. It includes the chairmen of the Federal Reserve Board, the Securities and Exchange Commission, and the Commodity Futures Trading Commission.
The working group was originally established by an executive order in March 1988 in response to the October 1987 stock market crash. In January 1994, Bentsen reenacted the group. Its primary goal is to promote information sharing among regulators and encourage consistent regulatory actions across markets and market participants. The group generally meets every six weeks.
The Governmental Accounting Standards Board is set to issue new financial reporting guidelines requiring municpalities to disclose the risks of their derivative investments.
Orange County Sanitaion Districts officials yesterday met with municipal executives from Lehman Brothers to help the agency recover from a $26 million technical default on its taxable commercial paper program.
Q&A: Peter Verniero, chief counsel to New Jersey Gov. Christine Todd Whitman.
A bill pending in the New Jersey Senate would require municipalities to balance their books according to generally accepted accounting principles, but local finance officers and their lobbyists around the state are lining up in opposition.
Officials at the Government Development Bank of Puerto Rico announced earlier this week a plan to finance approximately $8.5 billion in infrastructure repairs that need to be made on the island.
New on Calendar
Governments: The benchmark 30-year Treasury bond closed up 23/32 yesterday, to yield 7.84%.
Stocks: The Dow Jones Industrial Average closed down 3.03 points yesterday, at 3715.34.
Daily Yields (in percent) Yesterday Previous Day Year AgoMunicipal Bond Index 7.45 7.53 5.68Federal Funds 5.37 5.50 3.003 Mo. Treasury Bill 5.93 5.87 3.0930 Yr. Treasury Bond 7.84 7.91 6.29