The Broader Market

by Alon Cohen and Jordan Eizenga

The federal government is holding a significant number of foreclosed properties from mortgages it guaranteed before the housing bubble burst. The weak housing market would surely yield depressed prices if the government were to sell off these properties en masse. So what should we do with our growing stock of foreclosed homes? And can we put Americans back to work in the process?

Here’s what we propose: Institutions that hold tens or hundreds of thousands of these properties—both private institutions and those backed by the government, such as Fannie Mae, Freddie Mac, and the Federal Housing Administration, or FHA—should rehabilitate, retrofit, weatherize, and rent them or sell them to investors.

For the rest of the article, see here.

by Jordan Eizenga

The new World Trade Center is the latest casualty of a municipal bond market in turmoil. The developer of the office-and-memorial project in lower Manhattan this month postponed issuance of $900 million in tax-exempt bonds, because of rising yields.

Liberty Development Corp.’s problems are emblematic of widespread distress in the municipal markets: Default worries, near-elimination of municipal bond insurance, and tight credit conditions have led to higher interest rates and delays of important infrastructure projects that create jobs.

by Jordan Eizenga

Infrastructure projects across the country are not going forward as planned. The culprit is a weak municipal bond market.

Extreme predictions of widespread default, a lack of bond insurance, and tight credit conditions have weakened demand for tax-exempt bonds and increased borrowing costs. This has prompted issuers to put off financing important infrastructure projects and municipal bond issuance is currently at an eleven-year low.

Today, The Center for American Progress’ Doing What Works Project has released a plan

that will help stabilize the muni market, lower borrowing costs for issuers, and provide crucial support to state and local infrastructure projects.

by Jordan Eizenga and Seth Hanlon

In the months after the collapse of Lehman Brothers in September 2008, fear and uncertainty in the global credit markets spread to the municipal bond market. Investors fled muni bonds and prices plunged.

Advisers recommended that state and local governments delay issuing new debt because of high yields and weak demand. But pressing financial and infrastructure needs meant that state and local governments often could not just wait out the crisis. The turmoil in the municipal bond market threatened to worsen the nation’s plunge into recession.

by Seth Hanlon, Jordan Eizenga, and James Hairston

Critics such as Sen. Charles Grassley (R-IA), above, misrepresent the Build America Bonds program. The program radically improves the way federal support for local projects is delivered, helps taxpayers by lowering state borrowing costs, and reduces back-door subsidies for high-income buyers of municipal bonds.

by Jordan Eizenga

An issue brief on the inability of tax exempt bonds to stimulate private investment in the NOLA region following Hurricane Katrina.