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Massachusetts Liberal

Observations on politics, the media and life in Massachusetts and beyond from the left side of the road.

Tuesday, November 25, 2008

Lehman Brothers raising Pike tolls?

Just when you thought the Mass. Pike mess couldn't get worse, it does. The Globe tells us today the authority could be on the hook for a huge chunk of cash because of Lehman Brothers.

If you're like me, you might say "wait a minute, didn't they go belly up? Can they do that?"

In the muddy world of credit debt obligations, market rate auctions, derivatives and swaptions and who knows what else, the answer apparently is "yes we can."

The authority, like many other non-profits, bought complicated debt packages sold with the hook that they could get some control over interest rates. Many of those deals have gone south this year and the credit market collapsed.

In fact, deals the fell apart earlier this year probably contributed the demise of some of the bigger Wall Street players who were forced to repay some of their customers for their losses.

But in what may be the most bizarre twist -- the Turnpike Authority may be on the hook for a balloon payment on some of its debt because Ambac, the company that rates the bonds sold by the investment banks is facing a possible downgrading of its credit.
"The worst case, as far as I'm concerned, has come to pass," said Senator Mark Montigny, a New Bedford Democrat who leads the Senate bonding committee and was briefed on the problems yesterday. "We're looking at a sinking ship and the hole is getting bigger every day. And it's not just the ship at the Pike. It's the credit markets and the economy . . . This credit crisis is not over."
Montigny faults the Patrick administration for failing to investigate fully the complicated investments that led to problems. The administration points out the deals were made before they got there (which means the Legislature should have been looking?)

What is clear is that the authority hasn't done as good a job as others in renegotiating and getting out of the deals. And they apparently haven't done a good job getting repaid for their losses like other agencies.

So in the spirit of the problem, I propose any new tolls come with some name changes. Drivers should head through the AIG Tunnel from the airport, hop on I-93 and head north over the Ambac Bridge or south through the CitiGroup Tunnel. They could get free rides (unless it springs a leak or two or three hundred), just like the companies that made the questionable deals.

But by no means should they head west on the Lehman Brothers Turnpike. The tolls will be a killer.

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Blogger Ron Newman said...

Seems to me that the best course of action is for the Turnpkike Authority to default on the debt and enter Chapter 11 bankruptcy. The banks should take the loss, not the taxpayers and tollpayers.

November 25, 2008 10:12 AM  
Anonymous Anonymous said...

It appears in the present bailout environment that the ultimate payer of bank losses ARE THE TAXPAYERS.

November 25, 2008 3:19 PM  
Anonymous Anonymous said...

I think Ron was right about his thoughts. It's time these companies fold up their attache's and close the doors and enter into bankruptcy. The problem is, money grubbing idealists see an opportunity to make money off of bad debt. That's what has caused a lot of this crap going on now with the economy. Look at the Federal Government coming in to buy up bad debt now. What makes them think they're going to recover the losses sustained? They think we're going to do it for them, the taxpayers... It's getting worse is a hell of a note to make when "it's starting to get bad" can't be used!!!

November 25, 2008 3:28 PM  

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