NEW: Block Pledges No More Moral Obligation Bonds if Elected
Thursday, May 15, 2014
Rhode Island Republican gubernatorial candidate Ken Block has pledged that under his administration, there would be no moral obligation bonds, saying the 38 Studios bond deal "demonstrates a rigged Wall Street Game."
“Career politicians like using moral obligation bonds because they can spend money on whatever they want without any check or balance by the taxpayers.” Block said. “The corruption around 38 Studios shows exactly why political insiders need moral obligation bonds, because Rhode Island voters would never have approved general obligation bonds for this project. Wall Street insiders use moral obligation bonds to line their pockets at the expense of taxpayers across the country. They charge higher interest on these bonds than on taxpayer approved bonds, and then blackmail governments into treating them exactly the same.”
Block Statemen
The Block camp issued the following statment:
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST“The use of moral obligation bonds will cease to exist when I am elected Governor,” said Block. “These types of bonds make no sense: Rhode Island is paying a higher rate of interest for no good reason at all. On top of that, moral obligation bonds allow politicians to bypass voters and loan public money to projects that would never gain public approval.
Moral obligation bonds are different from general obligation bonds because the voters of Rhode Island do not approve them and there is no legal requirement to pay them. They are also subject to higher interest rates.
“The rating agencies are claiming that there is no difference between repaying general obligation bonds and moral obligation bonds in terms of the impact on the state’s credit rating,” said Block. “This begs the crucial question: if there is no risk of default, as is the case for general obligation bonds, then how come Rhode Island was not able to borrow at a lower rate of interest, as is the case for general obligation bonds? There is no reasonable answer: this system simply makes no sense.”
Even S&J Advisors, authors of an alarmist report in favor of repayment, acknowledged that “the rates on the 38 Studios Bonds seem quite high (especially for bonds rated AA+ by S&P and Aa3 by Moody’s due to the insurance policy by Assured Guaranty).
Block said that repaying the 38 Studios Bonds is an issue that stretches beyond Rhode Island.
“This issue concerns the borrowing practices of municipalities, counties, and states across the country,” Block said. “We are all playing a rigged game where taxpayers pay higher rates of interest for no justifiable reason. Wall Street has created a system where excessive interest rates are charged and the rating agencies are used to prop up this scam.”
Block also pointed to deeply corrupt practices at the big three rating agencies during the lead up to the financial crisis, as reported by CBS, the New York Times, Business Insider, Huffington Post, and Rolling Stone Magazine.
“It’s very difficult to understand how the rating agencies have retained any credibility in light of their awful performance during the recession,” said Block.
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