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Abstract: 

Capital markets rest upon the role of the U.S. Department of the Treasury in managing the issuance of Treasury securities and preserving an effective financial system. Central to the decision making is Under Secretary for Domestic Finance Mary Miller, who started her career as a municipal bond analyst. Ms. Miller’s presentation addresses the recent financial crisis and its aftermath, changes brought about by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and contemporary issues facing the municipal market. American municipal securities enjoy a tax-exempt feature not found in any other subnational public finance market in the world. Debates about preserving state (and local) fiscal sovereignty predated the start of the federal income tax 100 years ago and continue today. Addressing this topic in an NFMA roundtable session are wealth manager Greg Aikman as moderator, institutional investor Cadmus Hicks, issuer official Ben Watkins, bond lawyer Kristin Franceschi, broker/dealer Alan Polsky, and regulator Lynnette Kelly. Despite their different roles in this market and the varied industry groups they represent, all are concerned about fundamental change. As Ms. Kelly notes, “tax exemption is talked about on both sides of the aisle as a subsidy for the rich, and not as an efficient source of capital for state and local governments.” In addition to the tax exemption issue, this expert panel discusses other contemporary regulatory and industry practices. As the old saying goes, aging is better than the lack of it. There are municipal credit implications of an aging population in general and an aging public workforce, in particular, in terms both of a vibrant tax base and of retirement (and health) program expenditures. Clarifying the issuesis a panel consisting of moderator Stephen Stowe along with state demographer Tom Gillaspy, economist Mehmet Tosun, and social worker Susan Rhodes. In addition to the demographics, economics, and social program designs associated with an aging society, the panel considers political and productivity issues as well. Macroeconomic factors affecting the municipal market remained an issue of concern at the 2012 NFMA conference. In a session moderated by David Litvack, Robert Grossman, a macro credit analyst, and Robert “Tim” McGee, a macro strategist, address global fiscal and monetary policies and the impact of sovereign (national) credits. Particularly instructive are their comments on the global economic market and the exposure of American money market funds to European banks. State and local governments need continuing access to infrastructure financing. Moderator Mark Ryan convenes a panel with transportation analyst Richard G. Little and Texas state transportation official James M. Bass to address the issues. Both speakers present evidence that infrastructure needs continue to grow while funding falls short. This collection of presentations from the 2012 NFMA conference ends with the focus on a major infrastructure deficit, which, in summary, quite nicely highlights the value of retaining the tax exemption of municipal securities, dealing with pressing credit conditions (such as an aging population), ensuring an efficient capital market, and monitoring the macroeconomic conditions that affect global and domestic capital markets.

Keywords: NFMA 2012 Conference

Affiliations:  1: Georgia State University.