State Treasurer Tate Reeves joined the treasurers of Pennsylvania and California today to testify before the U.S. House of Financial Service Committee in Washington D.C.

The hearing gave the committee an opportunity to receive testimony and recommendations regarding the turmoil in the municipal marketplace. The municipal bond market has been suffering from spillover from the meltdown of the subprime mortgage market in recent months.

“The current stress in the bond insurance industry is not at all caused by the consistent, highly profitable cash flow of traditional municipal issuers, but instead by the re-investment of these profits into higher risk ventures,” Reeves said.

Reeves stressed that the affordability and accessibility of the municipal bond market is critical to state and local governments. The capital raised in the municipal marketplace builds school, hospitals, roads and other vital infrastructure and public projects. Reeves also noted that the tax-exempt market is vital in the aftermath of disasters such as Hurricane Katrina.

“Many of the recovery projects in Louisiana, Alabama, and Mississippi post Katrina have been and are being aided by the G.O. Zone Act of 2005, State Treasurer Tate Reeves said. “This congressional act allowed for many unique bond applications that greatly benefited the taxpayers of Mississippi.”

Reeves recommended several technical changes to the committee that would create greater liquidity and stability in the municipal bond market. “Congress does not need to over-react to the recent market turmoil by creating more regulation and federal subsidies that the taxpayers underwrite,” said Reeves.

“There are prudent market-oriented policies that will bring added stability to the marketplace. By working together, we can continue to ensure a viable, efficient market that ensures the lowest cost of capital for our state and local governments, thereby maximizing the benefit to all of our taxpayers.”

State Treasurer Tate Reeves
3/12/8