Such offsets are required by federal law, and apply to other programs in addition to BABs.
More importantly, BABs have saved money for taxpayers in virtually every state, even taking into account underwriting fees.
State and local issuers took the deal and BABs were a huge hit.
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Some recent press coverage has provided a misleading picture about a successful Recovery Act program, Build America Bonds (BABs).
The possibility of offsets has been clear from the beginning of the program, and BABs remain very popular among municipalities and investors.
Ms. Cohen and others see prices on existing BABs climbing or at least maintaining their value because of the lack of supply going forward.
The rush to sell BABs before the deadline is also driving up yields on those securities, adding to state and local government borrowing costs.
Citigroup municipal-bond analyst George Friedlander said he hadn't given up hope yet that concerted lobbying by states and cities could persuade Congress to renew BABs.
For individual investors, BABs have lower yields than regular municipal bonds.
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Recent coverage also exaggerates the risks to issuers of using BABs.
The Administration is constantly looking for ways to improve the BABs program, but it is important that we not throw out the BABs with the bathwater.
Furthermore, by attracting new investors to municipal bonds, BABs have also helped to relieve the supply pressures in the municipal bond market and lowered borrowing costs.
Babs was what Diana, God help us, might be thirty years hence high-heeled, ceramicized, liposucted, devaricosed, her golden fall of hair as shiny and hard as peanut brittle.
BABs have proven to be an effective financing tool that have enabled municipalities fund critical infrastructure projects at a time when they were facing severe financing challenges.
To be honest, BABs are not the Medicaid expansion.
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Under the original BABs program, the Treasury Department makes direct subsidy payments to State and local governmental issuers in a subsidy amount equal to 35 percent of the coupon interest on the bonds.
But, then, I thought BABs were as well.
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The BABs program, which enabled borrowers normally confined to the muni market to tap a broader universe of big investors, has helped insulate muni bonds from the effects of generally poor state and local government finances.
BABs subsidy payments are only offset if the issuer is seriously delinquent in paying money owed to the federal government, and less than two percent of payments have been offset to pay delinquent taxes so far.
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There are economic reasons why BABs underwriting fees may have started out high and then come down: underwriters took on risk with a new product and had to bear start-up costs and devote resources to educate investors for their initial offerings.
Adding to the pain was the news that the BABs program now seems unlikely to be extended past this year, contrary to some hopes that it could stay in place in some fashion as part of a deal to extend other tax benefits.
Like BABs, AFF Bonds would be conventional taxable bonds issued by State and local governments in which the Federal government makes direct payments to State and local governmental issuers in a subsidy amount equal to 28 percent of the coupon interest on the bonds.
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