CA Stops Using Muni-Bond Insurance
The state of California, the country's largest issuer of municipal bonds, has decided to stop using municipal-bond insurance, a huge blow to the struggling industry, according to a report on CNBC.
"In the current market--and given the condition of the bond insurers--it makes no sense," Tom Dresslar, the Director of Communication for California State Treasurers Office, told CNBC. "There's no value to the taxpayer."
From 2003 through 2007, California spent $102 million to insure $9 billion in California General Obligation Bonds. This year, the state has spent no money on muni bond insurance for the two issues it has floated: a $3.3B economic recovery bond, and the $1.75B GO issue that will price this Wednesday.
"Bond insurance has no value," Mr. Dresslar said.
The state is not soliciting bond insurers for business and doesn't know if and when it will, Mr. Dresslar said.
The decision couldn't come at a worse time for bond insurers, which are struggling to keep their crucial Triple A ratings after getting hit with billions of dollars of losses from insuring sub-prime related debt.
Published on March 4, 2008
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