Durbin Bill Designed to Throw Wrench in Wall Street Infrastructure Heist

Since we so seldom have positive news to report on NC, we thought it was important to highlight a promising development. Senator Richard Durbin has introduced legislation that would considerably complicate the effort of Wall Street players to pillage privatize state and government assets for fun and profit.

It is key to understand what a bad deal these transactions are for ordinary citizens. In addition to having sizeable up front fees, the return requirements are well in excess of the government entities’ borrowing rates, typically just under 20%. That means after you allow for the up front charges, the effective cost of funding is likely to be 20% or even higher. How does it make the remotest iota of sense for governments to fund at rates comparable to that of credit card borrowers? (Note this 20% figure applies only to a large portion of the funding, the equity slice, but given that these deals, involve aggressive rate hikes, and deals like the Chicago parking meter deal have NPVs for the deal of roughly 2x, if not more, than the sellers received, the extraction via user charge increases is extremely aggressive, and calls the attractiveness of the funding into question).