Frequently Asked Questions - Q15


Wonít those same predictions be repeated regarding this proposed amendment?


We donít believe so. We strongly believe that rating agencies and bond dealers will welcome the financial discipline offered by this proposed charter amendment, once they actually understand it and what it does and doesnít do. Certainly, one must recognize that: (a) bond rating agencies and dealers in municipal securities profit from the City issuing new debt or refunding old debt and from furnishing ongoing ratings of unpaid debt; and (b) perhaps fewer City of Houston bonds might be issued under the fiscal discipline required under this proposed charter amendment. However, one must also recognize that even though the federal Securities and Exchange Commission does not have direct oversight over the municipal bond rating agencies and used to not be very involved in the municipal bond market, the SEC seems to have shown increasing interest in the workings of the municipal bond market and any hint of undue influence in local elections by those involved in the municipal bond market. Further, dealers in municipal securities are governed by the rules, including regarding political activities, of the Municipal Securities Rulemaking Board. Certainly after the recent spate of disclosures of improprieties in the financial markets no one will wish to give even a hint of intemperate remarks impacting municipal financial elections.

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