SUBSCRIBE to Capitol Fax      Advertise Here      Mobile Version     Exclusive Subscriber Content     Updated Posts    Contact
CapitolFax.com
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        


23 Comments
  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:

    @DrVoodoo:

    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:

    @Walker:

    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.


* *** UPDATED x1 - Frerichs response *** Former Democratic state treasurer endorses Cross - Cites bipartisanship, Israel bonds as reasons
* Prison reform group responds to new Rauner ad
* Quinn hit on botched early prisoner release program
* Reader comments closed for the weekend
* SUBSCRIBERS ONLY - Friday's cable TV buys
* Yesterday's blog posts

Support CapitolFax.com
Visit our advertisers...

...............

...............


Search This Blog...

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

Search the 98th General Assembly By Keyword

          
        * Motorola Moto X for Verizon coming this September 26?
        * LG Wine Smart is company’s first flip style smartphone
        * Don’t Let iOS 8’s Accidental Selfie Feature Ruin Your Life
        * Thoughts on the iPhone 6 from a Windows Phone user (Video)
        * Oculus Rift 'Crescent Bay' prototype hands-on: A VR alien waved at me and I waved back
        * Our 5 favourite new Windows Phone apps of the week
        * Lumia instagramer of the week: John Koliogiannis

        * Alibaba IPO Ranks as World’s Biggest After Additional Shares Sold
        * Shelly Palmer Radio Report – September 22, 2014
        * Smartypan Is A Smart Pan
        * Hydroelectric Tidal House Looks Out Of This World
        * Samsung Galaxy Mega 2 Spotted On Thailand Website
        * Oppo R5 Could Be Released Soon
        * Snapdragon 810 Processor Could Be In Vivo Xplay 5 Smartphone

        * Danks cruises with abundance of support
        * Bassitt eyes revenge against first-place Tigers
        * White Sox 10, Rays 5: Indoor fireworks
        * Danks cruises with abundance of support
        * Rays add run after out at first overturned
        * Sale's final start to come Wednesday in Detroit
        * Danks tries to guide White Sox to series win


        Main Menu
        Home
        Illinois
        YouTube
        Pundit rankings
        Obama
        Subscriber Content
        Durbin
        Burris
        Blagojevich Trial
        Advertising
        Updated Posts
        Polls

        Archives
        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

        Syndication

        RSS Feed 2.0
        Comments RSS 2.0
        WordPress

        Loading


        * Durbin favors investigation into Quinn's NRI pr.....
        * Which way will Karen Lewis run?..
        * Approaching elections raise questions about wages..
        * Fetus found dead on Near West Side..
        * Chicago Latinos optimistic about new archbishop..


        * Chicago Latinos optimistic about new archbishop
        * Court: Illinois inmate must pay prison costs
        * Ground broken on new Chicago veterans' home
        * CTA: Fewer people trespassing on train tracks
        * Libertarian could help tip Illinois governor race
        * GOP's Rauner gets another $1M from hedge fund CEO
        * Cicero man convicted in girlfriend's death
        * Alton's ConAgra plant gets new name, new sign
        * Former Illinois prisoners get help reintegrating
        * Large freighter runs aground, gets stuck in Duluth

        * Don’t bet on gaming expansion — yet
        * GOP's Rauner gets another $1M from hedge fund CEO
        * Former Illinois prisoners get help reintegrating
        * Court: Lincoln inmate must use $20K settlement to pay incarceration costs
        * Deadline ahead for Illinois marijuana businesses
        * Gov. Quinn picks up Sierra Club endorsement
        * Statehouse Insider: Rauner hit with double whammy
        * More than $59M collected from state retirees; refunds coming eventually
        * Lawmaker wants pumpkin to be official Illinois pie
        * Quinn: No pension ‘Plan B’ before court ruling

        * Scramble is on for tenants to anchor a third office tower
        * A grandmother can be CEO — or president
        * Which Chicago startup will be next with an IPO?
        * When $400 million can't buy love
        * The bleeding has stopped, but Navistar is still struggling


        * Nation needs to address end-of-life care
        * Joshua Miner to go on trial in gruesome Jan. 2013 double homicide
        * Hispanic families embrace Cupich
        * Area Catholics optimistic about Cupich
        * Four held without bond in shooting death of 9-year-old
        * U of I board chairman says not hiring Twittering prof was right call


        * Woman sexually assaulted in Lakeview neighborhood
        * Two wounded in Sunday afternoon shootings
        * State's locks, dams in urgent need of repair, report says
        * Police: 2 charged in city tow truck scam
        * In the pews, Chicago-area Catholics embrace news of next archbishop
        * Suburban woman dies weeks after being struck by cab in Old Town
        * Cops: Robbery suspect fatally stabbed by alleged victim
        * Veterans home set to open on Northwest Side
        * Appellate court: Inmate must pay $20K toward his incarceration
        * Glen Ellyn police searching for missing autistic woman


        * Cupich to be next Chicago archbishop
        * Treasurer Candidate Tom Cross Says He Would Sue The Legislature To Force A Balanced Budget
        * Listen to State Week - September 19, 2014
        * Quinn Defends Public Education, Though He's A Product of Private Schools
        * Chris Mooney: More Evidence-Based Policymaking Needed
        * African Drumming At Southwind Park On Saturday
        * Investors gather in Chicago seeking cannabis businesses
        * Climate, Space Create Challenges For Local Food
        * Can A Governor Really Create Jobs?
        * How do you find high school dropouts?


        * Don’t bet on gaming expansion — yet
        * Thomas Schneider and Jay Scott: Building strong families to curb child abuse, neglect
        * GOP's Rauner gets another $1M from hedge fund CEO
        * Former Illinois prisoners get help reintegrating
        * Court: Lincoln inmate must use $20K settlement to pay incarceration costs
        * Deadline ahead for Illinois marijuana businesses
        * Gov. Quinn picks up Sierra Club endorsement
        * Our Opinion: Springfield needs Magro project
        * Angie Muhs: Open government is worth fighting for
        * Statehouse Insider: Rauner hit with double whammy


        * Everyday People
        * Friction arises over football field use
        * Neighbors oppose store in west Davenport
        * Village in Bloom seeks young artists to sculpt
        * Open Line
        * Police reports
        * Our view
        * Running on full, not empty
        * Prosperity, just over the state line
        * Irene Partain


        * Roethlisberger, Steelers top Panthers 37-19
        * ‘Runner' outpaces ‘Tombstones' with $32.5M box office haul
        * Wheeling man crashes into parked car, lamp post, spa
        * Police: 4 kids killed in crash not in seat belts
        * 1 dead, several hurt in Delaware bus crash

        * Representative Jan Schakowsky Sends Letter...
        * Rep. candidate pushes to uphold marriage b...
        * Reps. Schakowsky and Waxman Introduce Bill...
        * Statement by Representative Jan Schakowsky...
        * FAA Rejects Call For New O'Hare Noise Stud...
        * Representatives Quigley, Duckworth, Schako...
        * Representative Jan Schakowsky Statement on...
        * Representative Jan Schakowsky Statement in...
        * Representative Jan Schakowsky Statement on...
        * Rep. Jan Schakowsky discounts threat from ...

        * Syria vote isn't last word from Congress o......
        * AIHA Wants NIOSH to Recommend E-Cigarette ......
        * Legislation Targets NFL's Tax Exempt Status...
        * Legislation Targets NFL's Tax Exempt Status...
        * Legislation Targets NFL's Tax Exempt Status...

        * Democrat Giannoulias backs Republican Cros......

        * Who really benefits from Rauner’s donations to GOP organizations?
        * Require Higher education Advice? It truly is Identified In This Post
        * The Great Beefsteak Raid
        * Some Concepts About College You Must Know
        * No More Trouble in Completing Difficult Writing Assignments
        * The Highland teachers strike. A great editorial in the St. Louis Post-Dispatch.
        * Sunday reads.
        * Gov. Mike Huckabee Endorses Mike Bost for U.S. Congress
        * Rauner says he'll make administration picks based on qualifications, not favors
        * 'Suicide fanatics' facing demonstrators in Chicago


        * Quinn still refusing to fire 20 political cronies
        * Illinois Chamber of Commerce Endorses Rauner for Governor
        * Rauner Web Ad: “Cut from the Same Cloth”
        * Illinois Department of Human Rights Commemorates International Day of Peace
        * Quinn Misleads Public on IDOT Again




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