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Madigan on SEC: “There are no victims here”

Thursday, Mar 14, 2013 - Posted by Rich Miller

* Sun-Times

House Speaker Michael Madigan, a decades-long constant at the Statehouse as Illinois’ pensions entered their death spiral, minimized the impact on bond investors Wednesday after federal securities regulators accused the state of misleading investors about the true calamity facing the state’s pension funds.

“It’s important to understand that the buyers of Illinois’ debt have all been paid their interest and their principal. We have not reneged on our debt payments,” Madigan told reporters when asked about this week’s damning Securities and Exchange Commission report against the state.

“So there are no victims here. Nobody’s lost any money,” Madigan said. […]

In making his statements after an appearance at an International Brotherhood of Electrical Engineers appearance, Madigan shifted blame for the problems cited by the SEC on his old nemeses.

“It’s more Rod Blagojevich and John Filan,” Madigan said, referring to the impeached ex-governor and the head of his budget office. “They got what they deserve.”

Fraud is fraud, and bond buyers could’ve received a higher interest rate had it not been for that fraud. So, yes, there were some victims.

His point about the Blagojevich administration is on point, however. The SEC pointed the finger of blame directly at them, and nobody else, for that fraud. There’s no shifting here.


  1. - VanillaMan - Thursday, Mar 14, 13 @ 8:08 am:

    Yet, Michael J. Madigan co chaired Rod Blagojevich’s reelection campaign knowing more about him than 99% of the 2006 voters. Good job, there, Mr. Speaker - looking out for us, eh?

    So, there are no victims here, Mr. Speaker? Coming from you, that’s hard to believe.

  2. - funny guy - Thursday, Mar 14, 13 @ 8:17 am:

    I wonder if the state’s lawyer—the Illinois Attorney General— agrees with her dad. Is this guy for real? Unbelievable!

  3. - Woody - Thursday, Mar 14, 13 @ 8:19 am:

    == There’s no shifting here. ==

    Apparently no check and balances, either.

  4. - Anon60076 - Thursday, Mar 14, 13 @ 8:23 am:

    Nothing to see here, folks. Move on.

  5. - Steve Brown - Thursday, Mar 14, 13 @ 8:27 am:

    Read the SEC report and notice they fail to blame any of the professionals who were paid lucrative fees to opine on each issue. The Wall Streeters and perhaps the SEC itself might have raised some questions.
    FO course it was the SEC who allowed the predatory lenders and all their allies to plunder the economy

  6. - wordslinger - Thursday, Mar 14, 13 @ 8:35 am:

    –Fraud is fraud, and bond buyers could’ve received a higher interest rate had it not been for that fraud.–

    Interesting point. I imagine some class-action-type lawyers might be of the same opinion and looking into it.

    For the early issues in question, Illinois still held a AA rating.

    Another interesting angle is that no matter how the state’s bond team — including outside advisors and bond counsel — weasel-worded it’s official statements, rating agencies conduct independent reviews of state finances before. They gave investors a big thumbs up.

    The SEC is breaking new ground here with focus on munis, and all issuers would be wise to get up to speed on the new scrutiny. The game has changed.

  7. - Small Town Liberal - Thursday, Mar 14, 13 @ 8:40 am:

    - Fraud is fraud -

    Completely agree, and kudos to the current administration for their honesty about the situation.

    However, I’m a little confused about the same thing word is. Was it really that hard to figure out the system was in trouble? I mean, I was younger, and paid less attention at the time, but even I seem to remember plenty of stories about the underfunded pensions. Maybe I’m misremembering it wrong.

  8. - VanillaMan - Thursday, Mar 14, 13 @ 8:50 am:

    No victims, but the Speaker would like you to know he couldn’t have done anything to change this. So, I guess Speaker Madigan’s power is mostly ceremonial and symbolic. Pity, he was so out of the loop and as helpless as a newborn duckling.

    We sure could have used a leader, but I guess a fellow would have to be one first. Quinn, Madigan, all those folks under the Dome, duped and silent, as they hid under their desks.

    But hey, “no victims”, right Mr. Speaker? Whew! That was a lucky break for our luckless state, eh?

  9. - Fred's Mustache - Thursday, Mar 14, 13 @ 9:26 am:

    You know, I side with the Speaker on this one. I think you have to look at his “no victims” comment in context. Everyone that invested in Illinois debt received every principal and interest payment promised them. The SEC even stated themselves that the State has taken significant remedial actions to correct the problem. The SEC could have resolved these issues quietly and used much needed resources to pursue actions where the investor harm is much greater.

    What about taking on broker dealers that sell complex structured products or non-traded REITS that have big fees and have investors money locked up for indefinite amounts of time? How about the frauds where people have lost all of their money? I think its another example of the SEC taking the route that gets them the most press rather than taking the route that does the most good.

  10. - RNUG - Thursday, Mar 14, 13 @ 9:30 am:


    I know lawyers whip up class action suits over every little thing these days, but I’m not seeing the case. Regardless of what the State said, in the end it was still up to the bond houses to perform due diligence and do their independent analysis. As has been noted, there was plenty of informaiton on the state of the pension funds.

  11. - Cincinnatus - Thursday, Mar 14, 13 @ 9:44 am:


    Worth noting is the Senate Republicans helped the SEC discover this issue. What information were they privy to that the Speaker did not have?

  12. - Demoralized - Thursday, Mar 14, 13 @ 9:48 am:


    Give it a rest. You have absolutely no idea how much nonsense went on under Blago with regard to bond issues. I was around those people - personally. Shady deals. “Consultants” being paid outlandish fees. The list goes on and on. But you go ahead and continue with your partisan hackery. It doesn’t make it any more true though.

    Oh, and in case you didn’t know this, the GA doesn’t issue bonds. OMB and the Governor’s office take care of that. So your attempts to link the Speaker. How’d that “fire Madigan” thing work out for you guys? That’s what I thought.

  13. - Demoralized - Thursday, Mar 14, 13 @ 9:50 am:


    It wouldn’t be that hard to figure out. All they had to do was look at the disclosures and see that the truth was nowhere to be found. Call up the SEC and say, “hey, you need to look at this.”

  14. - Cincinnatus - Thursday, Mar 14, 13 @ 10:01 am:

    I agree, Demoralized. Which is why it is hard for Madigan, or anyone else in the GA claim they didn’t know what was happening!

  15. - Demoralized - Thursday, Mar 14, 13 @ 10:10 am:


    We have a 5th Amendment right against self incrimination. //snark//

  16. - Cincinnatus - Thursday, Mar 14, 13 @ 10:10 am:


  17. - wishbone - Thursday, Mar 14, 13 @ 10:17 am:

    “Maybe I’m misremembering it wrong.”

    No, you are misremembering it right.

  18. - wordslinger - Thursday, Mar 14, 13 @ 10:20 am:

    –Worth noting is the Senate Republicans helped the SEC discover this issue–

    And worth repeating if the taxpayers get whacked by an investors’ lawsuit or a ratings downgrade because of this.

    You’re supposed to keep the dirty laundry in the house. Nobody likes a snitch, lol.

  19. - Woody - Thursday, Mar 14, 13 @ 10:24 am:

    == Nobody likes a snitch, lol. ==

    Well there goes my theory of having checks-and-balances…

    *Everyone* is on the take.

  20. - VanillaMan - Thursday, Mar 14, 13 @ 10:25 am:

    I’m not partisan. You are, and that’s one of the problems.

    When Michael J. Madigan looks like a passive observer instead of a freaking speaker, he’s not doing his job. No one should feel any obligations to defend Michael J. Madigan, or we’re all doomed.

    Madigan’s “no victims” quote is pathetic. He didn’t do what the country’s most dysfunctional state minority leadership did.

    Madigan did nothing as Blagojevich ripped us off. Quinn sat back and had a front row seat while his two-time running mate made deals that reeked of scandal and corruption.

    Everytime we discover another cost of having Rod Blagojevich’s filthy carcass in the governor’s chair - like in this case - should be a moment when good people duped into making him governor, apologize for their blindness, stupidity, or naivety.

    Madigan, of all people, should not be covering it up with, “no victims”.

  21. - Woody - Thursday, Mar 14, 13 @ 10:42 am:

    I agree with VanillaMan

    “He’s [Blagojevich] always been a person who’s honest and one of integrity…I have confidence the governor does the right thing all the time.”
    –Pat Quinn, October 20, 2006

  22. - Cook County Commoner - Thursday, Mar 14, 13 @ 10:43 am:

    Expecting bond houses and rating agencies to do “due diligence” appears naive, considering recent history.

    Although the interest was paid on the bonds, I’m curious if a case can be made that the bonds lost re-sale value due to failure of the state to properly disclose. I don’t follow munis, so I don’t know if that in fact was the case.

  23. - wordslinger - Thursday, Mar 14, 13 @ 11:02 am:

    –Although the interest was paid on the bonds, I’m curious if a case can be made that the bonds lost re-sale value due to failure of the state to properly disclose.–

    Theoretically, that could be an argument, as could that the bonds would have required a higher rate when originally issued.

    This is all new ground. The SEC increased scrutiny of munis in 2010. I suspect we’re going to see a lot more of this all over the country.

    Keep in mind, with these Illinois issues in question, some of the leading underwriters, financial advisors and bond counsel in the country signed off on the disclosure as being within the rules.

    The rating agency reviews are separate and independent of that.

    There’s going to be changes within the entire industry based on the SECs new aggresiveness.

  24. - Meanderthal - Thursday, Mar 14, 13 @ 11:09 am:

    The truth was a victim.

  25. - walkinfool - Thursday, Mar 14, 13 @ 11:17 am:

    I not only expect that bond houses did their due diligence, but believe that the “structural” funding problems of Illinois state pensions were publicly reported and known by them. Thus, both the pricing and risk associated with these bonds were set appropriately by industry standards.

    It is certainly appropriate for the SEC to demand that the state meet their requirements to specifically call out risk items, but to assume the risks were not already known and factored in during the bond house analysis, is probably wrong.

  26. - Demoralized - Thursday, Mar 14, 13 @ 11:23 am:


    I’m not partisan. Don’t particularly care for anybody at this point in time. Nor am I a Madigan defender. I’m simply pointing out that he had nothing to do with the issuance of the bonds. Those are just facts.

  27. - Arthur Andersen - Thursday, Mar 14, 13 @ 11:30 am:

    “No victims” is a charitable interpretation of the outcome, to be polite.

    What’s most bothersome to me, like Brown, is that all the shiny-suit dudes from up North and out East who rubber stamped this stuff over and over while drawing a big check (less the tithe to Friends of Blago) walk away scot free once again.

  28. - wordslinger - Thursday, Mar 14, 13 @ 11:46 am:

    New Jersey was the the first state whacked by the SEC for pensions disclosure in 2010.

    As far as I can tell from the google, there has been no investors lawsuit. Also, the state was downgraded in 2011, but the SEC action was not cited among the reasons.

    I’m thinking this is the SEC trying to look tough where it can in an effort to erase the lapdog image it earned in the years running up to Sept. 2008.

    And, yes, AA, we know that the shiny-suit boys on Lasalle and Wall streets are never personally accountable for anything.

  29. - Downstater - Thursday, Mar 14, 13 @ 11:48 am:

    We are all victims by having a state have to pay much more in interest cost than states with better ratings. As taxpayers, we get the bill, in the form of higher taxers, for their screw up.

  30. - Kasich Walker, Jr. - Thursday, Mar 14, 13 @ 11:58 am:

    It would have been better if the Speaker had left out the “victim” bit and stuck with “… buyers of Illinois’ debt have all been paid their interest and their principal.”

    But I get the point, but on the other side of the paper (byte(s)?) rates may have been higher on the IL issues with greater disclosure, but then those buyers who were unwilling to go after higher rates for the supposed risk of buying this state’s debt may have gone elsewhere. Others would have come in.

  31. - Kasich Walker, Jr. - Thursday, Mar 14, 13 @ 11:59 am:


  32. - Just Me - Thursday, Mar 14, 13 @ 12:23 pm:

    Does anyone else notice how when someone asks Madigan about the cause of the pension mess he always says it isn’t a good use of time to talk about the cause of the problem? I can’t help but think of that when reading this blog post. I wonder why he doesn’t want to talk about the cause of the problem?!?!

  33. - Hatless - Thursday, Mar 14, 13 @ 12:29 pm:

    I’m with Vanilla Man.

    Madigan playing Sgt. Schultz doesn’t work for me.

    Almost all of us are outsiders and reading the Capitol Fax is as close to inside knowledge that we have. I know that in politics you sometimes support people that you are not fans of, but by chairing Rod’s reelection campaign, Madigan told us outsiders that Rod wasn’t really that bad. And Quinn “the Reformer” was right there with him. Quinn does make a more believable Schultz.

  34. - Liberty_First - Thursday, Mar 14, 13 @ 12:32 pm:

    Love the “death spiral” hype.

  35. - Bigtwich - Thursday, Mar 14, 13 @ 12:36 pm:

    “Which is why it is hard for Madigan, or anyone else in the GA claim they didn’t know what was happening!”

    It would be hard for anyone to claim they did not know what was happening, investors, taxpayers, you, me.

  36. - Ruby - Thursday, Mar 14, 13 @ 12:47 pm:


    The state Journal Register - March 13 - House Speaker Michael Madigan said Wednesday public employee retirement benefits will have to be less generous if the state is going to get a handle on its pension costs.

  37. - RNUG - Thursday, Mar 14, 13 @ 1:03 pm:


    Madigan can say whatever he wants but he can’t evade the minutes of the 1970 Con-Con that are pretty clear about both the intent of the drafters of the pension clause on what was covered and subsequent court decisions that a layman would read to say the COLA is part of the protected benefit.

  38. - Ruby - Thursday, Mar 14, 13 @ 1:40 pm:

    But if he says public employee retirement benefits will have to be less generous, then there will victims.

  39. - Ruby - Thursday, Mar 14, 13 @ 1:41 pm:

    ..or there will be a court case.

  40. - RNUG - Thursday, Mar 14, 13 @ 1:55 pm:


    The victims will be the taxpayers who had their taxes mis-spent the last 35 years or so. Even with all the legal proposals for pension change, the math just doesn’t add up to enough savings to keep funding the rest of IL spending.

    If the GA were to suddenly discover enough backbone to pass the needed tax reform (either a really big hike or graduated rates), the voters would riot in the streets with tar and feathers … and vote everyone out next election. This is all a show for the voters to try to place the blame for the coming tax hike somewhere other than exactly where it belongs, the GA, and try to make sure the GA gets re-elected.

  41. - zatoichi - Thursday, Mar 14, 13 @ 2:02 pm:

    ‘We have not reneged on our debt payments.’

    Who eventually pays the tab for all of this? No victims? Please. Maybe not SEC investors. I guess Illinois tax payors do not count.

  42. - Sue - Thursday, Mar 14, 13 @ 2:32 pm:

    Sad thing is not only did the legislature fail to make sufficient payments they were increasing benefits routinely
    over the same time period. Regardless what anyone would like to see happen, it is unrefutable that the state can raise taxes high enough to pay what is required to fund the programs as necessary to pay the all promised benefits. We are either looking at a haircut or a default so the unions need to get serious and pick between those choices

  43. - wordslinger - Thursday, Mar 14, 13 @ 3:16 pm:

    –Maybe not SEC investors. I guess Illinois tax payors do not count.–

    What are you trying to say here? There’s no such thing as “SEC investors.” And, if anything, Illinois taxpayers got a better rate (although I think it’s a mountain in a mole hill).

  44. - Sue - Thursday, Mar 14, 13 @ 3:31 pm:

    Taxpayers really aren’t victims since the state allowed rates to remain at 3 percent rather then tax at higher levels required to amortize the pension liability while spending on other state programs. The problem is the ever increasing benefit levels outstripped the ability to make up for the deficit as the liability grew at 8 percent per annum. To borrow from President Obama it’s the math and the liality today is so huge the state canon tacit sway out of the mess it created. By the way Madigan ranthe state for most of the time all of this occured

  45. - Demoralized - Thursday, Mar 14, 13 @ 4:19 pm:


    You can trace the pension problem back decades. I get so tired of people trying to only blame Madigan. I’m not saying he didn’t play a role, but so did every Governor in recent history, not to mention most of the General Assemblies of the past. I know this blame Madigan for everything seems to be popular and I don’t necessarily like him any more than the next person, but those arguments are just silly.

  46. - Longtime taxpayer - Thursday, Mar 14, 13 @ 5:36 pm:

    I can see why Madigan wants to shift the blame. He’s been the one guy at the table for every sweetheart deal that’s bankrupted the pension system over the last 30 years. And every time he helped obscure the long term consequences of his actions on pensioners and taxpayers.

  47. - reformer - Thursday, Mar 14, 13 @ 6:07 pm:


    Didn’t your guy vote for the GOP ramp-up law that the SEC blames for aggravating the unfunded pension liability?

  48. - steve schnorf - Thursday, Mar 14, 13 @ 11:07 pm:

    I think the reasonable way to find out if investors were victims is to look and see if the values on state bonds sold during this period have plummeted since the SEC warned investors several days ago that they had been misinformed and inadequately warned of the perils of the state’s pension systems. Logically, now first aware of the perils the state had hidden from them investors would quickly be discounting the values of these bonds. Note-they haven’t, primarily because the market constantly adjusts and compensates for risk and reward ratios and the market has known every bit of this information since before the bonds were sold.

Sorry, comments for this post are now closed.

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