SUBSCRIBE to Capitol Fax      Advertise Here      Mobile Version     Exclusive Subscriber Content     Updated Posts    Contact
To subscribe to Capitol Fax, click here.
A little hypey

Monday, Mar 10, 2014

* AP headline

Study: Fiscal ’scarlet letter’ costs state extra $80M

* From the story

The study, conducted by DePaul University professor Martin Luby, a visiting researcher at the U of I institute, and Tima Moldogaziev of the University of South Carolina, set out to determine whether interest rates were even higher than other states’ rates in similar situations. They used a “’scarlet letter’ metaphor to note the hypothesized incremental risk premium demanded by investors on bonds that carry the name ‘Illinois.’” […]

“That’s above what the state should have been paying based on our worst-in-the-nation credit rating,” Luby said. “That’s one expensive reputation.”

OK, but we’re talking two-tenths of one percent, or about $16 million a year on average.

Yes, that money could’ve been better spent elsewhere, but it’s not a hugely gigantic pile of cash in the state’s overall budget.

- Posted by Rich Miller        

  1. - Empty Chair - Monday, Mar 10, 14 @ 2:39 pm:

    I’m sure JBT would disagree. That $80 million could have paid some vendors who are cash strapped because of the backlog.

  2. - funny guy - Monday, Mar 10, 14 @ 2:42 pm:

    Couldn’t agree more– cut out corruption and sweetheart deals sqq priceless!

  3. - Budget Watcher - Monday, Mar 10, 14 @ 2:52 pm:

    Sure it’s relatively small in the overall state budget, but $16M certainly could have paid for a few more anti-violence grants or other legislative minority caucus grants.

  4. - Bobby Hill - Monday, Mar 10, 14 @ 2:57 pm:

    - “OK, but we’re talking two-tenths of one percent, or about $16 million a year on average….but it’s not a hugely gigantic pile of cash in the state’s overall budget.”

    I guess I am wired differently, I just don’t think like that.

  5. - John A Logan - Monday, Mar 10, 14 @ 2:59 pm:

    Yeah……16 Million is chump change. No need to be concerned.

  6. - Norseman - Monday, Mar 10, 14 @ 3:07 pm:

    That’s an accounting error in Healthcare and Family Services.

  7. - Walker - Monday, Mar 10, 14 @ 3:14 pm:

    Read carefully.

    ===interest rates were even higher than other states’ in similar situations.===

    What they’re saying is that the rating agencies are overstating Illinois’ risk.

    Being unreasonably cautious, probably due to their previous errors.

  8. - Walker - Monday, Mar 10, 14 @ 3:17 pm:

    Their “red letter” (think “A”) is sardonically expressing an unfair, unwarranted, image-based rating.

  9. - DrVoodoo - Monday, Mar 10, 14 @ 3:24 pm:

    ===Illinois paid a “risk premium” based solely on buyers’ perception of its credit stability. The credit rating has worsened since then.===

    I’m not confident that the risk premium was out of line given that the rating has worsened. Sounds like they were building the potential for a worsening rating into the price, which was not a control point for the study.

  10. - just asking - Monday, Mar 10, 14 @ 3:26 pm:

    don’t all these not hugely gigantic piles kind of add up? I’m with Bobby H. as long as any waste is too small to worry about the institutional spiral keeps on rollin.

  11. - What is to be done? - Monday, Mar 10, 14 @ 3:40 pm:

    Puerto Rico to Sell $3 Billion GOs on Tuesday

    $3′Large’will be the largest muni deal ever. The new bonds will have a coupon that pushes 10% - and they will be priced in the hole to give the big-buck buyers a quick boost (retail investors will not see a dime of these bonds). These are tax free, so the fat cats will have a real yield pushing 16%! Thank you Uncle Sam!

    The underwriters stand to make a quick $40+ million in fees. Come Tuesday night, the Champagne will be flowing.(I think the deal will be a blowout success the whole $3B was all spoken for as of Friday)

    The best part of the deal(for the Street)is that the new bonds will be Senior to most of PRs other $70B of bonds. Thats because PR got rolled over a barrel and was forced to allow these bonds to be subject to NYS law meaning that the new bond holders can grab collateral, and force the other creditors to the back of the bus when the SHTF.

    In my estimation, the $3B deal will buy PR at least 24 months before the next credit crunch hits. I have little expectation that PR is going to turn things around in that period of time, so the crunch will happen. But that’s so far away that PR, and its financial woes, will fall off the headlines. As that happens, the new bonds are going to rip up in value a 10% pop in these bonds is a distinct possibility. That would mean that come Tuesday, those who get to play in this sand box stand to rake in an �extra� $300m.

    By Christmas, the new PR bonds will have been sold at big premiums over par to yield-hungry retail investors�(more Champagne). And the poor retail guys will be wondering what they bought sometime before 2017.

    So Hurray for Wall Street and the moneymen. The fact that $3b can be raised for a troubled credit (that does not have a rosy future) is a measure of power. WS can do what the IMF cant provided it gets paid well for the effort.

  12. - Walker - Monday, Mar 10, 14 @ 3:41 pm:


    You might be right; but wouldn’t ==”building the potential for a worsening rating into the price”== undercut the value of rating agencies as well? What are they there for, if not to competently predict future risk at a given point in time?

  13. - Formerly Known As... - Monday, Mar 10, 14 @ 3:48 pm:

    While this is not the end of the world, it does remind me of an iconic Illinoisan.

    To semi-quote Everett Dirksen: “A million here, a million there, and pretty soon, you’re talking about real money.”

    $16 million here, $30 million there…

  14. - DrVoodoo - Monday, Mar 10, 14 @ 3:53 pm:


    I agree with that assessment, but rating agencies definitely signal changes before making changes, and they don’t necessarily make changes in real time. Investors will make their own assessments beyond the ratings agencies, as they should. There are even discrepancies in ratings between the agencies at any given time.

    Of course, the ratings agencies credibility during that 2005-2010 period has been pretty substantially questioned post-financial crisis, and with good reason, so there is that.

  15. - Walker - Monday, Mar 10, 14 @ 3:55 pm:

    @DrVoodoo: Upon reflection:

    You’re right, I was wrong.

    Not an uncommon position for me.

  16. - $54.5 Million - Monday, Mar 10, 14 @ 4:06 pm:

    We Really need to pay our Bills! But if we wonder why we are in such bad shape. Its not the Pensions!!! It the gross mismanagement of tax payers money. How can a Governor use $54.5 million on an anti-violence campaign. This would have paid over 2/3 of the bills we owe. Then we cannot figure out where that some of the $54.4 million went. It looks like squeaky clean Pat may have been caught with his hand in the cookie Jar. Nobody cares, its public funds. Billions given to financial institutions, they don’t have to pay back. The Automobile bailout, not being paid back. Taxpayer fund just disappear and nothing is done. Until public officials are being held responsible for their actions, it will not stop. If there is no consequences public officials just keep giving out the cash. If they violate the public trust and misuse our money, somebody has to pay

  17. - VanillaMan - Monday, Mar 10, 14 @ 7:09 pm:

    That couldn’t even buy Pat Quinn votes on the South Side.

  18. - concern1 - Tuesday, Mar 11, 14 @ 4:29 am:

    $16 million is not a “huge pile of cash” ok send it my way then….this state has piles and piles of little piles of $16 million each…can this state get any more corrupt…ridiculous!!!!!!

  19. - Skirmisher - Tuesday, Mar 11, 14 @ 8:46 am:

    Rich- If you are of the opinion that $16 million flushed down the drain to no purpose is no big deal in the great scheme of wasteful state spending, then perhaps you have been consorting too long with Illinois politicos. Their mentality may be rubbing off on you.

  20. - Stuff happens - Tuesday, Mar 11, 14 @ 9:18 am:

    === OK, but we’re talking two-tenths of one percent, or about $16 million a year on average.
    === Yes, that money could’ve been better spent elsewhere, but it’s not a hugely gigantic pile of cash in the state’s overall budget.

    I keep telling the Illinois Department of Revenue that when it’s time to pay taxes, but they won’t listen. “It’s just a few thousand, and in the grand scheme of things it’s really not going to make a difference. Let me slide on it.”

    But then they tell me that they have to pay for bad credit ratings because they thought they could keep writing checks as long as there were checks in the checkbook.

  21. - olok1973 - Tuesday, Mar 11, 14 @ 9:30 am:

    “A million here, a million there”? You know the rest of the story. Are you on the Pat Quinn PR crisis team Rich?

  22. - Yellow Dog Democrat - Tuesday, Mar 11, 14 @ 9:45 am:

    I’d argue that the state’s bond rating is a lot less damaging to our economy and our budget than the incessant “Illinois is anti-business” from the business lobby.

    Of course, if the “scarlet letter” bond rating bothers folks, the simple solution is to not borrow money.

  23. - Demoralized - Tuesday, Mar 11, 14 @ 9:48 am:

    ==simple solution is to not borrow money==

    And how do you suggest we take care of capital needs, like building roads? You can’t just stop borrowing money.

Sorry, comments for this post are now closed.

* Happy Thanksgiving!
* *** UPDATED x1 *** Five unanswered questions
* *** UPDATED x1 *** Question of the day
* Caption contest!
* Crossing the line
* Moody's warns Illinois
* The Credit Union Difference
* *** UPDATED x1 - Franks responds *** Uh-oh
* Then and now
* SUBSCRIBERS ONLY - Today's edition of Capitol Fax (use all CAPS in password)
* Yesterday's blog posts

Visit our advertisers...







Search This Blog...

Search the 98th General Assembly By Bill Number
(example: HB0001)

Search the 98th General Assembly By Keyword

* “Futurama: Game of Drones” is a Matt Groening mobile game revival
* Latest Windows device stats show W10M picking up steam ahead of broad debut
* “Capicola” health tracker pictures released on FCC
* The Many Ways Of WeChat: How Messaging Is Eating The World
* If you bought a OnePlus Type-C cable for use on a third-party device you’re entitled to a refund
* [TA Deals] Get a VPN Unlimited lifetime subscription for 92% off and take 15% off on all VPNs
* Thinnest Windows smartphone to date gets ready to hit Japan

* Scouting profile: Adam Engel
* Alex Avila will try to shed limitations with White Sox
* White Sox program provides kids real chance
* Johnson solid candidate for White Sox rotation
* White Sox sign catcher Avila to one-year deal
* White Sox sign catcher Avila to one-year deal
* White Sox sign catcher Avila to one-year deal


Main Menu
Pundit rankings
Subscriber Content
Blagojevich Trial
Updated Posts

November 2015
October 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014
October 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
February 2013
January 2013
December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
December 2010
November 2010
October 2010
September 2010
August 2010
July 2010
June 2010
May 2010
April 2010
March 2010
February 2010
January 2010
December 2009
November 2009
October 2009
September 2009
August 2009
July 2009
June 2009
May 2009
April 2009
March 2009
February 2009
January 2009
December 2008
November 2008
October 2008
September 2008
August 2008
July 2008
June 2008
May 2008
April 2008
March 2008
February 2008
January 2008
December 2007
November 2007
October 2007
September 2007
August 2007
July 2007
June 2007
May 2007
April 2007
March 2007
February 2007
January 2007
December 2006
November 2006
October 2006
September 2006
August 2006
July 2006
June 2006
May 2006
April 2006
March 2006
February 2006
January 2006
December 2005
April 2005
March 2005
February 2005
January 2005
December 2004
November 2004
October 2004

Blog*Spot Archives
November 2005
October 2005
September 2005
August 2005
July 2005
June 2005
May 2005


RSS Feed 2.0
Comments RSS 2.0


* Governor Rauner faces challenge to block Syrian.....
* Rauner faces challenges in move to block Syrian.....
* Rauner faces challenges in move to block Syrian.....
* Rauner faces challenges in move to block Syrian.....
* Rauner faces challenges in move to block Syrian.....
* Rauner faces challenges in move to block Syrian.....

* Illinois high court takes Moline company's tax break appeal
* Rauner faces challenges in move to block Syrian refugees
* Boone County jail inmate charged with attacking guard
* Chicago schools prepare lesson plan on teen's shooting
* EXCHANGE: Augustana digitizing Hauberg glass plate images
* Chicago Public Schools reverses special education cuts
* Former Chicago Transit workers sentenced in fraud scheme
* Rauner pardons man found innocent of 1999 attack
* Springfield police chief bemoans body-cam 'burden'
* Illinois makes tax break deals with 3 companies

* Rauner pardons man found innocent of 1999 attack
* Springfield jobless rate falls again, to 5.1 percent
* Springfield police chief sees problems with body cam law
* Lawsuit challenges Illinois ban on marijuana campaign money
* Number of Illinois inmates released on parole climbing
* Bryce Benton circulating petitions to challenge Sen. Sam McCann in GOP primary
* Executive Mansion roof repairs nearing completion
* Candidates begin filing petitions for March primary election
* Benton circulating petitions to challenge McCann in GOP primary
* Rauner administration says House Democrats holding local aid hostage

* Review: Sociale in the South Loop
* Her Barbie was a lawyer. Now she defends victims' rights
* Meet the guy making money off your food scraps
* Anger, pain and calls for change in response to police video
* United, Delta bet on long oil slump

* Brown: Simeon basketball players bring their A-game to court
* 16 reasons every Blackhawks fan should be thankful on Thanksgiving
* Blackhawks cool off Sharks; Kane extends point streak to 17
* Four more Laquan McDonald police dashcam videos released
* President Obama: ‘Disturbed’ by Laquan video, grateful for ‘peaceful’ protests
* Black leaders call for Supt. McCarthy to resign
* Viktor Tikhonov embraces off-ice role as Artemi Panarin’s guide
* Ex-Hawks winger Ben Smith working his way back from a concussion
* FOP posts notice on raising bail for officer charged with murder
* Brian Bliss remains employed by Fire

* Fast fashion shopping: It's cute, it's cheap, but should you really buy it?
* Four new Laquan McDonald shooting videos raise more questions
* Overnight Log: Second night of Loop protests as they unfolded
* Teen dead, 4 other people wounded in city shootings
* 4 arrested in protest after McDonald video released
* Indiana's proposed new religious freedom plan draws ire
* Gov. Rauner grants clemency to 10, denies 200
* Live blog: Laquan McDonald protests in Chicago
* Man charged with home invasion after woman reported taken from Oak Park house

* Eugene Robinson: The GOP's political correctness dodge
* Douglas Holt: Woman's protest of Trump was misguided, inappropriate
* George Will: Muzzling pet advice another case of free speech erosion
* Bernard Schoenburg: Josh Langfelder took father's advice on election petition signatures
* Rauner pardons man found innocent of 1999 attack
* Springfield jobless rate falls again, to 5.1 percent
* Michael Gerson: The Trump effect, still 'understated'
* Catherine Rampell: For millennials, first comes love — then what?
* Springfield police chief sees problems with body cam law
* Lawsuit challenges Illinois ban on marijuana campaign money

* 48th Annual Turkey Trot
* Podcast: Champaign County States Attorney Julia Rietz 11-26-15
* Wednesday's highlights: Nottingham, Chargers get first win
* Clubs listings, Nov. 26-Dec. 3, 2015
* Area update: Soup kitchen needs help with backpack giveaway
* Frank's Faves: Giving thanks
* Golf links swap hits roadblock
* Chuck Koplinski: Beautiful 'Brooklyn' a love story for the ages
* Update on candidate filings in Vermilion County for 2016
* 80th N-G All-State Football: POY Josh King

* Carroll carted off; Peters, Quin also leave with injuries
* Charges: Man abducted, assaulted teen; kept him shackled
* Cardinals place OLB Woodley on IR, sign DT Bryant
* No. 20 Cougars look to complete special year against Huskies
* The Latest: Powder in parcel sent to Brussels mosque flour

* House lawmakers overcome hurdle on key tra...
* Rodney Davis talks funding with Bloomingto...
* The agency that fought Illiana gets a new ...
* Rep. Dold takes educational cruise down Ch...
* Lawmakers decry high turnover rate of VA h...
* CBD Oil, and politics
* Simon considering state Senate bid
* Killer Congressman Tom MacArthur trying to...
* Shutdown? State may not notice
* Rep. Bob Dold

* Nebraska ethanol producers name former Dur......

* Opinion: Sen. Kirk must stand with crimina......

* Chicago Teachers Union. “If we strike, we do so to protect our children,” says Karen Jennings Lewis.
* Resign.
* Don't Let The Turkeys Get You Down
* “The Driver’s Side” – News From The Motorist’s Perspective
* IDOT Debuts Winter Weather Driving Tips Video
* Pot Dangerous? Mother's Testimony Says Yes [video]
* Happy Thanksgiving
* It seems like it’s everywhere, that video of the final moments of Laquan’s life
* Laquan McDonald.
* Sixteen shots. The story that broke the silence.

* Emergency Management Officials, National Weather Service Encourage Winter Preparedness - November is Winter Weather Preparedness Month in Illinois
* Keep Your Family Safe This Winter - November through February are leading months for carbon monoxide related incidents
* Governor Takes Bill Action
* Illinois Department of Labor Director Hugo Chaviano Awards Governor’s Award for Contributions in Health and Safety to the Illinois Refining Division of Marathon Petroleum Company LP
* State Regulator Elected Treasurer of Interstate Medical Licensure Compact

    Hosted by MCS SUBSCRIBE to Capitol Fax Advertise Here Mobile Version Contact Rich Miller