how-wall-street-tobacco-deals-left-states-with-billions-in-toxic-debt

[warrior3995]

How Wall Street Tobacco Deals Left States With Billions in Toxic Debt - ProPublica

 

[Kent C]

The problem with the article is that it assumes that 'Wall Street' came to the states with the idea of selling tobacco bonds. The reality is quite different. States and localities have been selling bonds (usually after an election that authorizes them to do so) for decades. They are very familiar with the process and initiate the action themselves. Sure, some SPE (securitization company) is involved and may offer advice about how to go about certain issues, but in general, it is the states that initiate the process - not 'being sold' a bill of goods by "Wall Street".

An earlier piece at ProPublica:

How Tobacco Bonds Work, and What Can Go Wrong - ProPublica

.... offers a more objective view: "But some government officials wanted the money up front, to cover all sorts of budgetary needs. They said it would be better to get cash now in case tobacco companies couldn’t pay later on or if cigarette sales plummeted."

That doesn't sound like, as the story says: "Wall Street came knocking with an offer..." and then implies that the states were 'victimized'. Who are actually being victimized are the bondholders, and in the case of the states who promoted the bonds to their public by saying any shortfall would be paid out of the general budget - the taxpayers of the state - the real victims, not the states which initiated the idea.

A 'history' of various states that decided to sell tobacco bonds from 2002:

SECURITIZATION OF TOBACCO SETTLEMENT FUNDS

And some Forbes ("Wall Street?") articles (2004 and 2007 - ie before ecigs were a factor) that were critical of the idea of the states actually initiating the idea of tobacco bonds. They could have just took the money from the Master Settlement Agreement as it came in each year! :

The Trouble With Tobacco Bonds - Forbes
The Great Tobacco Bond Scam - Forbes

 

[sofarsogood]

If you click on the US map you get a list of all the states with the amounts of money they get from the settlement and what they did with it as far as borrowing. It's interesting to compare that with which States that seem most aggressive about taxing and regulating vaping.

 

[OCD]

The big takeaway here isnt who approached who because there is no doubt wall street was smoozing up and down the line once they saw the potential for huge commissions as sure as many politicians were clamoring for easy money to fix their failed budgets.

The story is why isnt vaping mentioned?

There has to be someone out there that would bring the pieces together simply for the sensationalism of it all. This is real cloak and dagger stuff going on and the tobacco bonds alone are a quarter of a trillion dollar attention grabbing tag line not to mention all of the various agencies lining up to be dragged through the mud. Add in the rest of the tobacco economy, the anti tobacco economy and a dash of pharma profits and the title could be "Twelve Zeros, Dollars from Death".

 

[Anjaffm]

excellent find, thank you very much!

 

[warrior3995]

I think this truly shows the mismanagement of the politicians who do not care of what happens down the road for the state in the long run, they lobby for the cash up front since they can use and line their pockets from it and know they will not have to deal with the mess after they are voted out, where everyone knows in the long run for the welfare of the state it is better to just receive the money over time like a paycheck and use it to balance out the ongoing budget and no interest on a loan. But much harder to do your money grab and run that way.

 

[warrior3995]

The problem with the article is that it assumes that 'Wall Street' came to the states with the idea of selling tobacco bonds. The reality is quite different. States and localities have been selling bonds (usually after an election that authorizes them to do so) for decades. They are very familiar with the process and initiate the action themselves. Sure, some SPE (securitization company) is involved and may offer advice about how to go about certain issues, but in general, it is the states that initiate the process - not 'being sold' a bill of goods by "Wall Street".

An earlier piece at ProPublica:

How Tobacco Bonds Work, and What Can Go Wrong - ProPublica

.... offers a more objective view: "But some government officials wanted the money up front, to cover all sorts of budgetary needs. They said it would be better to get cash now in case tobacco companies couldn’t pay later on or if cigarette sales plummeted."

That doesn't sound like, as the story says: "Wall Street came knocking with an offer..." and then implies that the states were 'victimized'. Who are actually being victimized are the bondholders, and in the case of the states who promoted the bonds to their public by saying any shortfall would be paid out of the general budget - the taxpayers of the state - the real victims, not the states which initiated the idea.

A 'history' of various states that decided to sell tobacco bonds from 2002:

SECURITIZATION OF TOBACCO SETTLEMENT FUNDS

And some Forbes ("Wall Street?") articles (2004 and 2007 - ie before ecigs were a factor) that were critical of the idea of the states actually initiating the idea of tobacco bonds. They could have just took the money from the Master Settlement Agreement as it came in each year! :

The Trouble With Tobacco Bonds - Forbes
The Great Tobacco Bond Scam - Forbes

Yes the politicians saw it like a lottery, But I am sure wall street smelled a win fall as well in big interest, here is a quote
"“The ink on the document was barely dry before these folks started coming at us, suggesting the idea of securitization,” said Christine Gregoire, who as Washington’s attorney general helped lead the tobacco settlement talks and later, as governor, opposed securitization.


Former Washington Gov. Christine Gregoire objected to borrowing against tobacco revenues but lost. Her state shied away from high-risk bonds.
“I was just like, ‘Wow, I can’t believe that they have immediately thought about how to get one-time money and be indebted to the revenue stream.’ And I remember from the very beginning being offended at the idea,” she said."

 

[Kent C]

Yes the politicians saw it like a lottery, But I am sure wall street smelled a win fall as well in big interest, here is a quote
"“The ink on the document was barely dry before these folks started coming at us, suggesting the idea of securitization,” said Christine Gregoire, who as Washington’s attorney general helped lead the tobacco settlement talks and later, as governor, opposed securitization.

Former Washington Gov. Christine Gregoire objected to borrowing against tobacco revenues but lost. Her state shied away from high-risk bonds.
“I was just like, ‘Wow, I can’t believe that they have immediately thought about how to get one-time money and be indebted to the revenue stream.’ And I remember from the very beginning being offended at the idea,” she said."

When Gregoire was elected governor, the securitization was already in place by Gov. Gary Locke (D) from legislation in 2002. So 'as governor' being against securitization was a bit late.

At any rate, when you have 50 Attorney Generals making a play for tobacco money and protecting the tobacco companies from any real or imagined harm in law suits against them (by smokers who knew smoking wasn't good for them), then any further actions by gov't or gov't and Wall Street are going to run into problems. Same with gov't wanting people who couldn't afford mortgage payments forcing banks to make loans they never would have made without the gov't forcing them to. Future 'toxic loan packages' were sold on Wall Street but the initial problem was gov't regulation of banks. Again, the 'solution' became bigger than the 'so-called problem' and of course gov't then blames Wall Street and with the lapdog media, so does everyone else. It wasn't the truth, but it made certain factions feel 'warm inside' knowing they meant well and that Wall Street takes the hit - that's even better!

 

[DrMA]

That's only part of why they're desperately trying to prevent vaping from eliminating smoking. The real big money is in excise taxes, which overshadow MSA payments by a factor of 2.

http://www.who.int/tobacco/surveillance/policy/country_profile/usa.pdf?ua=1

US Tobacco Tax Revenue US$33,282MM (not including State, County and Local taxes). US Tobacco Control defraud the Federal coffers of more than US$556MM per year to peddle their dogmatic hatespeach, again, not including local grants.

For comparison, TMSA payments total an estimated $17B per year.

 

[DC2]

There has to be someone out there that would bring the pieces together simply for the sensationalism of it all.

In a world where real journalism trumps advertisement money, yeah.
That's why you'll almost never see pro-vaping articles in the mainstream media.