Municipal Bond Policy Proposals in Tennessee

Last month, I wrote about problems involving municipal bond sales and advice in Tennessee. Yesterday, the state comptroller wrote a guest column explaining what went wrong with municipal bonds and suggesting some of what he will propose today to prevent such problems in the future.

According to an article in today's New York Times, the comptroller is proposing to prohibit towns and counties from using sophisticated derivatives, and will allow only highly sophisticated officials to assess bond derivative transactions. He will also propose more disclosure of fees associated with bond transactions, and a rule that will allow any firm to play only one role in any transaction, whether it be sales, financial advice, underwriting, or lawyering.

These proposals will be presented today to the State Funding Board.