Remember the tobacco settlement?
Kenneth Thomas has covered how many state level deals to entice private companies are bad deals, including sports stadiums, as ‘job creators’ extol their own virtues. Run has covered the defunding of state unviversities and also the rise in tuition and student debt. Robert Waldmann writes about the constant ballance of reporting. Yves Smith has covered mortgage settlements and the end runs the financial industries has accomplished regarding regulation and housing as well as. Ah well?! Even done deals make the investor class money…too bad that excludes most.
How Wall St. Tobacco Deals Left States With Billions in Toxic Debt
In 1998, attorneys general from across the country sealed a historic deal with the tobacco industry to pay for the health care costs of smoking: more than $200 billion in just the first 25 years of a legal settlement that required payments to be made in perpetuity.
When politicians wanted upfront cash from the victory, bankers happily obliged. The price? A handful of states promised to repay $64 billion on just $3 billion advanced, ProPublica’s Cezary Podkul reports todayin an article co-published with Marketplace.
Podkul’s investigation into more than 100 tobacco deals since the settlement found that they are creating new fiscal headaches for states, driving some into bailouts or threatening to increase the cost of borrowing in the future.
ProPublica’s analysis is the first to measure the magnitude of the high-risk debt involved in the tobacco deals and to calculate how much Wall Street’s dealmakers earned. It also shows how much of the tobacco money has been securitized – that is, turned into payments that go to investors. As of this year, at least one out of every three dollars coming in under the settlement is pledged to investors, according to bond disclosures and payment data from the National Association of Attorneys General, which tracks the flow of funds.
The full story is available here at Pro Publica
I thought getting the tobacco money up front was an insane idea at the time. And I didn’t even understand about the borrowing. It’s enough to make me a deficit hawk: it’s true that politicians have no sense much less sense of responsibility when it comes to borrowing.
Or, maybe they do, look how well their friends on wall street are doing out of the deal.
Just great. Not only does RIland have the Studio 38 bond issue noose around our neck we have this one too!