Ja se sap que la justícia de les Espanyes no es ni equànime, ni cega ni plural.

Només cal veure com un Assassí confés diposita un centenar de milers d’euros en un jutjat i aquest “el jutjat” rebaixa la pena de l’assassí un 15%.

També es irrisori que sempre valgui més la paraula d’un policia que la de varis testimonis, siguin o no del rollo!

Indignant! i després hem pregunten perquè no vull ser Espanyol!

mitjançant  Cinc condemnes i una absolució per als encausats dels Monjos.

There are little resources out there for CDD bonds so I am hoping this post will shed some light on the issue:

http://dms-us.com/documents/developer-fact-sheet.pdf

http://www.rainmakermarketing.com/community_development_district_financing_plans/community_development_district_financing_plans.htm

http://www.morningsidepc.com/cdd.htm

http://www.staugustinerealestatepro.com/cdd.html

Treasuries posted solid gains across the curve after the selloff yesterday.  Tomorrow we get housing starts as well as C, GE, and BofA  earnings to contend with.  A rallying equity market as well as tighter swap spreads also caused a mini rally among high grade corporates today, except for CIT.  A few issues are trading in the single digits. 

Will the Yield Curve continue to get steeper?  Below is a one year chart of the 2yr/10yr Treasury spread.  If the stock market can continue its rally I think the yield curve will continue to get steeper.

One of the biggest debates is whether higher rates are good for the economy or whether they will damper the economy.

Payment-option adjustable rate mortgages will contribute to higher defaults, said Rick Sharga, executive vice president of
RealtyTrac. Option ARMs allow borrowers to pay less than the interest they owe each month, tacking on the difference to their
total debt and creating the potential for bigger bills in the future.

-Riskiers assets were in vogue today and caused the treasury market to sell off today.  The 2yr/10 yr spread increased to 259 bps.  The 5 yr plummetted 15 bps, 10 yr increased 13 bps, and the 30 yr soared 12 bps.  Investment grade corporate spreads were tighter on the day and the VIX fell to its YTD low.

-Apparently negotions between CIT and the government have broken down. The Credit Trading Blog makes an interesting point:

Given the blowout in spreads of index constituents CIT and ILFC, I was not surprised to see the intrinsic index basis gap around a bit; it reads 17bps rich but that’s largely noise due to huge moves in those 2 issuers (i.e. tough to arbitrage). A few folks have noted that CIT was the 2nd most popular holding for CDOs which will lead to further downgrades. Technically they are not ‘held’ by CDOs but rather ‘referenced’ as these are synthetic CDOs where the underlying names may, or may not, be actually held in the pool of securities; but their performance is always reflected. While CALPERS is certainly known as being activist, few would call them naive investors. They are suing the rating agencies for “negligent misrepresentation.” Story is here. This is not likely to come as a surprise, but investors should take note that post bankruptcy recovery rates for bonds are well below historic averages. Year to date, recovery for bonds has averaged ~$19 (vs ~$27 last year and a long term average of ~$37). Looking higher in the capital structure to secured loans, those have averaged ~$45 (vs $58 last year and long term average of $71).

-In Municipal news, Moody’s lowered the State of California two notches from A2 to Baa1  (Bloomberg Story Here).

-From the FOMC Minutes ace of contraction is slowing, but economic activity to remain weak for a time. Fed expects exceptionally low levels of federal funds rate for an extended period. Higher unemployment forecast, and the board is wary of buying more Treasurys.

-Mortgage applications rose 17.7% last week, MBA says. The average interest rate on 30-year fixed-rate mortgages fell to 5.05% from 5.34%.

-From Scott Granis, The Calafia Beach Pundit:

Higher interest rates are a sign of economic health, not a threat to the economy. They are also signaling that the Fed should start raising short-term interest rates before inflation becomes a problem.

Below is a list of California specific California Municipal Closed End Funds (CEF’s) compiled from ETF Connect.

Symbol	Last	Change
Dow	8,359.49	27.81 (0.33%)
Nasdaq	1,799.73	6.52 (0.36%)
S&P 500	905.84	4.79 (0.53%)

A very sloppy and quit session today in the Treasury market as traders seemed focus on the equity market and the Goldman Sach earnings.   The curve flattenned nearly the entire day but screamed higher late in the day.  The 2 yr/10 yr spread was as low as 247 bps and closed the day at 253 bps.

Meredith Whitney’s comments got the stock market giddy today suggesting that bank stocks have strong potential and also updated Goldman Sachs(GS). The bond market was modestly amidst the stock market rally in addition to the release of the treasury budget details.

From the WSJ:

The U.S. budget deficit broke past $1 trillion in June, a grim testament to the recession and financial crisis. The federal government spent $94.32 billion more than it made in the ninth month of fiscal 2009, the Treasury Department said Monday in its monthly budget statement.

With that latest spill of red ink, the budget gap, for the first nine months of fiscal 2009, widened to $1.086 trillion. A year earlier, the deficit was $285.85 billion for the same nine months.

In June 2008, the government ran a surplus of $33.55 billion. Fiscal years start Oct. 1. The White House has predicted the deficit will climb to $1.841 trillion this fiscal year. The biggest deficit for any fiscal year on record is $454.8 billion, which was rung up in fiscal 2008.

A survey of economists by Dow Jones Newswires forecast a June deficit of $97.0 billion. June federal government spending totaled $309.68 billion, compared to $226.37 billion in June 2008.

Year-to-date federal government spending totaled $2.67 trillion, compared to $2.22 trillion in the first nine months of fiscal 2008.

Here is a chart from Calafia Beach Pundit:

As these charts should make clear, we are in uncharted territory when it comes to the federal budget. Revenues are down 15% in the past 12 months, the steepest decline on record, while spending has soared 26% over the same period, also a record. The budget deficit is now 10% of GDP, $1.4 trillion: Federal spending is now 25.5% of GDP, while tax receipts are a mere 15.4% (See full post HERE).

I learned via the Central Jersey Regional Library Cooperative that “Senator Brian Stack (D-Hudson (mayor Union City) has introduced S. 2775 which would reduce the minimum funding for public libraries to 1/6 mil from 1/3 mil of the equalized valuation of the real property.”  

While this bill is specific to municipal libraries, it’s still a very large cut.  Many of New Jersey’s municipal libraries will probably not be able to keep operating  with a minimum budget of 1/6 of a mill-per-dollar — especially when 1/3 of a mill-per-dollar is difficult enough to maintain current operations.

NJLA has set up a Take Action site.  So, please, if you are a New Jersey resident — do just that.

Pinnacle Airlines Misses Q4 EPS Estimates http://tinyurl.com/bccac9

The daily show absolutely ripped into cnbc last night. A-freaking-mazing http://www.businessinsider.com/jon-stewart-rips-on-cnbc-rick-santelli-2009-3

GM auditors warn of bankruptcy risk: http://tinyurl.com/cy5t2h

New jobless claims take surprise dip http://tinyurl.com/clmp6c

A better way to fix the bank’s toxicity (without screwing the taxpayer) http://short.to/1qod

Jobless Claims Remain Elevated http://tinyurl.com/dhd4mt

BOE, ECB Cut Interest Rates: The Bank of England cut official interest rates by half a percentage point to 0.5% .. http://tinyurl.com/cbr826

Municipals Lead Closed-End Fund Market: Munis outperformed other funds last month http://tinyurl.com/djvxw3

European Banks Both Cut Key Rates http://tinyurl.com/dl9vrt

Productivity Falls, Labor Costs Rise http://tinyurl.com/cw8ds5

What Worried Baby Boomers Should Do About Their ETFs http://tinyurl.com/b2jdot

Citi regarding the govt’s motivation for converting preferred to common: http://bit.ly/3obnyK

Memo From Singapore: East Asia’s Small Edens of Trade Wilt as Need for Exports Dries Up http://tinyurl.com/avw2nw

Sterling Dives after BoE Announced 50bps Cut and 75b Pound Quantitative Easing Program: Sterling weakens sharply.. http://tinyurl.com/cu68km

HFNews : UBS Defies US Demands On Secret Accounts http://www.hedgeco.net/n/10029

Geography of a Recession http://adjix.com/5jku

Morningstar bank stress test http://news.morningstar.com/articlenet/article.aspx?id=282552

Cramer’s Response to the White House: http://tinyurl.com/ao445j

Stock Market Spiraling, Nearing Point of Maximum Pessimism – Sovereign Society http://is.gd/lUWy

Fed report details economic struggles – Bizjournals.com http://ow.ly/ExE

http://theplaysblog.wordpress.com

TB’s Quote of the Day: “Twang your magic Twanger, Froggie.” That, kids was from the Buster Brown Show (“I’m Buster Brown, I live in a shoe…that’s my dog Tige…he lives in there too!). Froggie was mean but offset by the affable Midnight the Cat who always meowed: “Nice.” This bit of trivia brought to you by Trader Bill who wishes to hell there was somebody out there with a magic twanger to put us out of our misery!

…what could be more appropriate than three, rich, spoiled, auto company CEO’s testifying before Congress (Alms for the poor), and begging for that magical $25 billion to get them thru to the next Congress so they can beg some more. But what did these lightbulbs do of late? Each flew down in his personal corporate jet which ABC picked up and prompted one legislator to ask: “Two questions…did any of you NOT fly down here in your personal jet?…secondly, are any of you willing to sell it today and find another way home?” Dead silence with looks like “what’s that supposed to mean?”

Thus the three blind men returned home empty handed…for use of a plane…there was a great op ed by Mitt Romney in the NY Times…is he gunning for energy czar? Specifically he talked about those CEO’s bragging about cost cutting thru plant closing, layoffs, etc…but give up their perks? No way! This is what you get when you have spoiled kids running major corporations…for their own benefit. He mentioned that Mullally (Ford), as part of his contract, is flown home to Seattle and back every weekend on the corporate jet…think about that cost…downtime etc…guess they have never heard of jet leasing plans…but then a CEO cannot be expected to fly like a common millionaire.

They didn’t quite leave empty-handed though because overnight GMAC applied for status as a bank and in case you think there is any doubt they have already began an exchange of $38 billion of debt…it is no longer what is good for GM is good for the country but what is good for GM AND Cerberus (co-owner of GM and owner of Chrysler)…they have so many ways to get you….and just what do we get for this? A pile of bad loans three feet high!

Then there was Citi, now having bought back the last $17.4B of SIV’s…good riddance! Remember that song from Camelot? Some Day My Prince Will Come…funny name but used frequently in jazz…well, Prince Alaweed is proving himself a prince…you thought they got rid of ‘Prince’ but that was the CEO…he is increasing his stake from 4% to 5%, call it a massive averaging down…heck it worked once for him…but will it this time?

Meanwhile, stocks turned into toxic waste as even the best of the best sold off…industrials! While financials tanked even more (-10.3%). KBW Banks were -10.3%, Nasdaq Banks -6.8%; Insurers -7%; and Brokers -11.6%! REITS tumbled 13.5% and are definitely toxic waste. Energy is a disaster too: all 138 stocks in the NYSE Energy Index were down and the Index fell 5.4% while Oil Services fell by 6.6%.

So what do you do? Yesterday, TB suggested Gold might be ready to rebound…and it did, to $764.80 before failing to hold $750 once again…in the 21 sessions since 10/22 it it has closed above $750 exactly twice and immediately failed, now we will probably head south and test the $681 low…that could be the buying opportunity. TB thinks a ‘hedge’ might be long gold, short crude…he’s just sayin’…

Yesterday, TB also discussed how common stocks of some of the best companies are trading in low double digit p/e’s or mid-high single digits and that dividends are attractive. Now recall he had advocated preferred stocks but on the basis of dividend yields on the common they could be a better buy. ‘Could’ because of the following:

1. the dividend could be cut…especially for financial stocks…look at GE, on last nights close the yield was 8.57%, p/e is 7.4x and p/e to growth is deep value at 0.7x…BUT they have tapped the TARP so they could be forced to cut the dividend…while the dividend on the common would continue to be paid. At last nights close GEC, the 6.10% preferred yields 8.07%. Now look at AT&T (T), the yield is 6.34%…and not a financial company, p/e is 8.9% but p/e to growth is 1.46x so not cheap. The preferred (ATT) has a 6.375% dividend  but closed at $23.40 throwing off a 6.81% yield. Taking more risk are the financials. Bank of America’s 8.20% closed at $19.77 for a 10.36% yield with upside potential of 26.5% while, yield on the common is 9.8% with a p/e of 8.3x and PEG of 1x; Wells Fargo’s 8.625% closed $25.10, so yield is the coupon and there is no upside…if interested it has spiked down as low as $19 once and $21 once…so that is the way to buy it…below par. Foreign banks: Royal Bank 6.75% yields 23.24% at current price of $7.25 with potential 344% capital gain; Barclays 6.625% yields 15.3% at current price of $10.82 with 271% upside; ABN 7.25% yields 17.7% at $8.31 with 300% upside. Note nothing was said about the downside…you have to determine the risk (caveat: you do NOT buy preferreds like common stock…if you just put in a buy/sell order at market you are going to get killed…you have to know the market and get inside. Also, all preferred’s are not created equal…TB avoids those of Citi due to the cards being stacked in their favor…did you expect otherwise? Also if cumulative you have a tax liability even if the dividend is not paid (like a zero coupon bond), and trust preferreds receive the dividend from the company but may not have to pay it out…like Citi. Lastly, while ‘qualified’ dividends are subject to 15% tax a dividend paid in a ‘loss’ year does not qualify.

2. DILUTION. Also last night G/E announced they are in talks with for Asian sovereign wealth funds to raise capital…this could mean serious dilution depending on whether they  want common or preferred…remember Buffett took the 10% preferred! Wachoivia’s CEO Steel spoke at a breakfast meeting and said that there are seven different financial regulators and we need to do something about that…he also said IF they had raised capital it would have diluted shareholders equity by 60-70%…get it?

3. Some of the preferreds, again to cite GE as an example are trading at deep discounts meaning you could have huge unheard of capital gains with the preferred too…and that could take much less time than for the common to recover. There is 31.8% upside in GEC and 6.8% in ATT…so you can see which is the better buy.

Now about bonds…there are bonds…and there are bonds. Treasury’s are rich but will likely get richer…but that could be problematic down the road, plus the intraday volatility has made them as risky as buying preferred’s from a market risk perspective. Federal Agencies provide more yield but with a wide spread if you need to sell early. Junk bonds are being pounded as are mortgage backed paper. So what is left: high grade corporates and municipals:

What is a high-grade corporate these days? …and if you find one will it be by tomorrow? The answer is in diversification as many including PIMCO’s Bill Gross see corporates cheaper and thus more attractive than common stocks and you have seniority in a bankruptcy. The secret is in diversification! For non-institutional investors buying bonds is expensive…except for new issues where you get the bonds at the same price as the big guys…also many municipal issues now have retail order periods where the individual gets preferential treatment. For the small investor, consider a corporate exchange traded fund like the iShares iBOXX Investment Grade Corporate Bond Fund. It has out performed the index over the past year and its peers while fee is just 15 basis points (0.15%), has tremendous tax efficiency compared to a mutual fund as most ETF’s do, and no one bond is more than 1.5% of the portfolio with the largest positions being IBM and JNJ at 2.3%, and the top ten (Barclays, PEP, BRK, ABT, AZN, and WMT) totalling just 11.9% of the portfolio! Now THAT is diversification. the indicated yield is 5.75%, pays monthly, and fees are subtracted daily at 1/365 of the annual rate…so you only pay while you own it. Since 9/15 it is down 8.6% (7.7% with dividends reinvested), but is well off the lows…ytd it is down 13.4% (-9.4% w/divs). There are also muni etf’s but they are thinly traded but still very liquid…you can buy California (3.7%), New York (3.5%), or general market (3.8%), if you don’t need state tax exemption…consider trade off of yield for diversification in the general market names as without insurance muni’s are a lot riskier than in the past…especially in a deep recession! Remember odd lot (<$1MM) muni’s are highly illiquid and thus costly to sell! Junk bonds will have their day, like all dogs, but this is not the time to speculate on them.

Investment grade includes AAA, AA, A and Baa rated. 

Florida Schools, California Convert Auction-Rate Debt

By Jeremy R. Cooke

Feb. 22 (Bloomberg) — California, Florida schools and the operator of John F. Kennedy International Airport joined a growing list of municipal borrowers exiting the U.S. auction- rate bond market as record failures push taxpayer costs higher.

Thousands of auctions run by banks to set rates on the debt failed this month as investors shunned the securities and bankers refused to submit bids, sending interest costs as high as 10 percent on some bonds. Auctions covering as much as $26 billion of bonds a day failed to attract enough buyers since Feb. 13, according to Bank of America Corp.

Florida’s Palm Beach County Schools converted $116 million of the securities into fixed-rate debt this week, while the Seattle area’s Valley Medical Center refinanced $170 million. The Port Authority of New York and New Jersey said it would redeem $200 million next month after its weekly interest rate rose as high as 20 percent.

“We expect to be out of the auction-rate market business in six to eight weeks,” said Steve Coleman, a spokesman for the Port Authority, which operates JFK and New York City’s other major airports and owns the World Trade Center site.

Rates in the $133 billion market are determined through a bidding process every seven, 28 or 35 days. Auctions fail when there aren’t enough buyers, leaving bondholders who wanted to sell stuck with the securities and taxpayers with higher interest costs.

Rising Failures

Yesterday’s 641 auctions of publicly offered bonds resulted in 395 failures, or 62 percent, according to data compiled by Bloomberg from four auction agents including Deutsche Bank AG. Just 44 failures were recorded between 1984, when the market was created, and the end of last year, Moody’s Investors Service said in a Feb. 19 report.

The rates when auctions fail are spelled out in documents governing the bonds, and are set as high as 20 percent or based upon money-market benchmarks.

Borrowers — including local governments, hospitals, museums, student-loan agencies and closed-end funds — must pay the penalty rates until buyers support future auctions, or they can modify the bonds to another kind of variable-rate debt or apply a fixed rate.

The average rate for seven-day municipal auction bonds rose to a record 6.59 percent on Feb. 13 from 4.03 percent the previous week, according to indexes compiled by the Securities Industry and Financial Markets Association.

`Unacceptable Level’

Palm Beach school officials started working on a conversion plan in December when rates topped 4 percent. They reached 9.75 percent this week, short of the 15 percent penalty rate. The district’s interest payment for this week’s auction was about $220,000, up from $107,000 during a week in December.

“As a public entity, that’s an unacceptable level of risk for us,” said Leanne Evans, treasurer of the 170,000-student district, one of the five largest school systems in Florida. After converting the debt, the district pays a 4 percent yield.

California, the biggest municipal borrower, plans to replace $1.25 billion of auction-rate bonds, said debt manager Paul Rosenstiel. New York City’s Municipal Water Finance Authority yesterday said it will pay off auction debt by selling $684 million of variable-rate demand notes on March 18.

Until this year, banks that collect annual fees of about 0.25 percent to run auctions would step in to stop failures when bidding faltered. Goldman Sachs Group Inc., Citigroup Inc., UBS AG and Merrill Lynch & Co. stopped committing capital after banks sustained at least $146 billion in credit losses and writedowns from the subprime mortgage collapse. That’s left corporate treasurers and wealthy individuals, some of whom bought the debt as cash equivalents, unable to access their money.

continues… 

Nachdem mehr als tausend Auktionen für Municipals (Kommunalobligationen) fehlgeschlagen sind und daher die entsprechenden Kommunen heftige Strafzinsen zahlen müssen (in einigen Fällen bis zu 20%), hat nun auch New York Governor Eliot Spitzer die Nase voll: wenn die Monoliner bis Dienstag nicht mehr Eigenkapital eingesammelt haben, werde es zu einer möglichen Zwangszerschlagung durch die New Yorker Versicherungsregulierung kommen.

Spitzer möchte damit einer wahrscheinlichen Abstufung der Ratingagentur Moody´s zuvorkommen. Diese hatte vor einigen Tagen mitgeteilt, dass Moody´s bis Ende Februar ihre neue Einschätzung gegenüber den Bond Versicherern veröffentlichen will. Da sich die Situation an den Fixed-Income-Märkten und vor allem an der Immobilienfront nicht verbessert hat (sondern sogar verschlechtert), ist ein Downgrade sehr wahrscheinlich. Dieser Downgrade hätte zur Folge, dass alle von den Monolinern versicherten Produkte ebenfalls nicht mehr AAA geratet werden würden. Da der versicherte Bond-Markt riesig ist ($2.5 Billionen – Fitch Juli 2007), sind die Auswirkungen gewaltig: die Finanzierungskosten für Municipals (Marktvolumen rund $1.2 Billionen) steigen deutlich an. Dementsprechend muss dann an anderer Stelle gespart werden (z. B. Kündigungen, keine Gehaltserhöhung,..). Zudem führt dies zu weiteren gigantischen Abschreibungen. Dies liegt daran, dass Investoren von den meisten strukturierten Produkten wie beispielsweise CDOs mark-to-market Verluste nicht sofort in ihre Bücher nehmen müssen, wenn sie vorhaben das Produkt bis zur Fälligkeit zu halten und es zur keiner Ratingabstufung kam. Durch eine Ratingabstufung müssten die Investoren dann sofort ihre Verluste abschreiben. Dies wird für einige Banken und Versicherer noch sehr teuer werden. Zu guter Letzt ist noch der Vertrauensverlust zu nennen: dies wird dazu führen, dass die Spreads noch weiter rauslaufen werden (obwohl wir uns in einigen Bereichen schon auf sehr hohem Niveau bewegen – siehe zum Beispiel iTraxx und CDX).

Da ich es für unwahrscheinlich halte, dass sich mehrere Banken zusammentun und den Monolinern das Geld schenken werden, wird es wohl zu einer Aufspaltung der Firmen kommen. Eine Firma wird dann ausschließlich Municipals versichern (also das klassische Geschäftsfeld der Monoliner) und die andere Firma wird auf allen übrigen Positionen (CDOs, CDOs squared,..) sitzen bleiben. In diesem Fall würde letztere Firma natürlich Pleite gehen, aber zumindestens wäre das Municipal Bond Problem gelöst. Dies scheint daher die langfristig beste und wahrscheinlichste Lösung zu sein. In ein paar Tagen wissen wir mehr!

Aquesta setmana s’han aprovat les modificacions dels impostos i altres tarifes municipals als municipis d’Amposta i de Tortosa.

A Amposta l’increment global és del 3,5%. Segons el web de l’Ajuntament equival a l’IPC català. Algunes taxes es queden igual, com la llicència d’obertura d’establiments, les llars d’infants, el transport públic, el telecentre, l’IBI i l’impost de vehicles. Altres disminueixen, com el 10% de la recollida d’escombraries als locals industrials i comercials, el 5% de l’Escola d’Art, i el 6% de les entrades al teatre. La recollida d’escombraries augmenta un 25%, un 8% menys de la proposta d’augment del Consorci de Gestió de Residus arran del soterrament dels contenidors -indignant que soterrar els contenidors impliqui penalitzar amb impostos la societat-. Podeu consultar més informació al web de l’Ajuntament d’Amposta.

Quant a Tortosa, la majoria d’impostos s’actualitzen amb l’IPC (2,5%). La recollida d’escombraries augmenta un 14%, per tal de reduir la diferència entre allò que es paga i el preu real del servei. La tarifa de l’aigua augmenta un 4,5%. Podeu consultar més informació al web de l’Ajuntament de Tortosa.

Nota: Com es pot veure, l’IPC al qual fa referència l’Ajuntament d’Amposta (3,5%) i el de Tortosa (2,5%) no són el mateix. Segons l’Idescat l’IPC  general de Catalunya de l’any 2006, segons la nova base 2006=100, fou del 3,7%, mentres que el d’Espanya fou el 3,5%.

Més enllaços:

• Tortosa apuja un 14% el rebut de les escombraries i un 4,5% el de l’aigua (La Marfanta).
• Amposta puja un 25% el rebut de la brossa pel soterrament dels contenidors (La Marfanta).

Os dejo el enlace en EL PUNT para que podáis mirar la noticia.

A New York Times story published this weekend mentions a new problem from the current credit crisis: funds for legal aid.  It turns out that many state bar associations have found resources for legal aid from escrow accounts.  The programs are known as Iolta (Interest on Lawyers Trust Accounts) and they generated $212 million for legal aid across the US in 2007.

If you have ever purchased a home and negotiated for the seller to throw in some dollars to help fix up, say a roof, then you have put funds in escrow.  Those dollars generate interest.  The interest doesn’t go to you, though…and in many cases, it ends up paying for lawyers to represent indigent defendants.

As our federal government is lowering the cost of lending, the interest on these accounts is bearing a very low return.  This is unfortunate timing, as right now there is a surge in need for defense.  The foreclosure crisis in North Carolina has brought a lot of work to NC Legal Aid.  I imagine other states are the same, and that places like California, Florida, and Nevada are all the worse.

Individual escrow accounts are routed electronically by participating banks into a common NC IOLTA account.  Banks provide the transfer for free.  Some banks pay higher than normal interest for these accounts (BAC, BBT, WB, RY, see full list).

This seems like an inspired idea that is helping people.  Yet, the interest rate risk is apparent and would likely happen whenever the government wanted to stimulate the economy.  I wonder if the policy for handling escrow accounts could be changed.  In many states, there is  a less-than-normal appetite for municipal bonds.  Right now, a county with a AAA rating is still paying at least four percent for bond issues.  That would exceed what most checking accounts are paying by a large margin, and it would still bear very little risk.

The best fit, in fact, would be to park those escrow dollars in municipal bonds dedicated to state housing finance agencies.  The interest payments could still go to legal aid.  In fact, it might generate a lot more income.  (Wachovia savings accounts are paying less than 0.05 percent interest right now.)

But then there is the positive result that could come from putting that money into municipal bonds.  Consider how this might work in one state – North Carolina.   In North Carolina, advocates have sought a $50 million appropriation for affordable housing development for some time.  That would be a big increase.  As recently as 2007, North Carolina’s affordable housing bonds paid for $18.1 million in housing.   Switching escrow accounts from savings to municipal state housing finance agency bonds would instantly create some of the demand to meet that goal.