Saturday, May 3, 2014

New Treasury Chief from JPMorgan-BearStearns

The Bond Buyer reported:

A new office at the U.S. Treasury Department will focus on state and local finance issues, including distressed municipalities and their management of pension and other unfunded liabilities.

Current JPMorgan managing director Kent Hiteshew will be the first to helm the Office of State and Local Finance when he takes it over in mid-May. He will report to Treasury Assistant Secretary for Financial Markets Matthew Rutherford, according to a story first reported by the Wall Street Journal and confirmed by The Bond Buyer.

Hiteshew currently oversees public finance for the Northeast region and the housing finance group at JPMorgan, where he has been since 2008. Before that he worked at the now-defunct Bear, Stearns & Co. for 18 years, and earlier at Morgan Stanley Inc. and the former Drexel Burnham Lambert.
Don't forget JPMorgan and Bear Stearns paired up to repeatedly gouge Jefferson County, Alabama on municipal financing.  Bloomberg reported:

JPMorgan, Bank of America, Bear Stearns, and Lehman Brothers Holdings Inc. charged Jefferson County about $50 million above prevailing prices for 11 of the interest-rate swaps the county bought between 2001 and 2004. None of the fees were disclosed to the commissioners, records show. 

Does it make you feel better someone from JPMorgan and Bear Stearns will be in Washington to help distressed municipalities?   

Muniland reported (Reuters):

Municipal bond issuance continues to shrink, but bank borrowing by municipalities is rising. I’ve suggested that the U.S. is creating the same problem that China is now trying to climb out of. Municipal issuers are taking loans that the public does not know about. Of course, I don’t expect Congress to do anything proactively about this issue. For anyone to pay attention, the undisclosed bank loans of a state or a city will have to blow up.

GASB has ensured  government balance sheets will blow up in the coming year.  When full pension liabilities hit, as required, cities and states will overnight look like a Texas bank in the midst of the oil bust.

Wall Street investment houses and private equity underwriters (PEU's) have billions on the sidelines for public infrastructure.  They need a disequilibrium event which the accounting profession kindly supplied.  Municipal revenue streams, water, sewer, toll roads, parking, airports, etc. will likely be fire sold to fund monstrous pension deficits.  Think Chicago parking or Illinois toll roads.

Treasury has a Wall Street insider in place to  ensure things happen to the big money boys' advantage.  It's the American branded Government-Corporate Monstrosity, Eisenhower's Military-Industrial Complex on trillions in federal steroids.  A state and local finance crisis is coming.

Also, PEU's stand to benefit from public pensions needing to have higher returns.  I expect they'll be able to buy state/municipal cash cows on the cheap and garner a larger chunk of public pension money for investment purposes.  PEU's win, which is no surprise given politicians Red and Blue love PEU.