Businessweek Quotes Howard Cure on State Debt Issues

December 1, 2011

Bond banks, typically overseen by state officials and gubernatorial appointees, can provide individual investors with access to the municipal-securities market for communities that may lack the resources to conduct their own offering, said Howard Cure in an interview with Businessweek.

Cure is the director of municipal credit research at Evercore Wealth Management in New York.

“Bond banks give you a little more comfort to have a pool rather than individual small towns,” said Cure. “As an investor, you may be hesitant about a little town in Vermont because of the small size.”

When the banks sell debt, some of the proceeds may be put into reserve funds to provide extra security for investors, he added. Such reserves and other provisions help “prop up” the credit of smaller entities that might otherwise be considered riskier.

“As a small town, if something were to happen to a major industry, it could disproportionately hurt your finances,” Cure said. “A lot of the bond bank’s appeal also is the fact that these little issuers can’t rely on municipal-bond insurance very much anymore.”

The Vermont Municipal Bond Bank has sold $123 million in securities this year, up 25 percent from $98.4 million in 2010, according to data compiled by Bloomberg. The organization created in 1970 was the nation’s first of its sort, set up to help raise funds for cities and towns.