For the first time, the former chief regulator of the $2.69 trillion
municipal bond market has come out swinging at the banks, alleging that
they prevented him from regulating the swaps and derivative deals that
ultimately cost municipal governments more than a billion in losses.
Until 2007 Christopher “Kit” Taylor was the executive director of the
Municipal Securities Rulemaking Board, a body set up by Congress in
1975 to make rules for firms that underwrite, trade, and sell municipal
debt. The board is basically run by Wall Street firms, which control 10
of its 15 seats. “The big firms didn’t want us touching derivatives,”
Taylor, told Bloomberg yesterday. “They said, ‘Don’t talk about it, Kit.”
Taylor went on to condemn the banks for stalling his efforts to close revolving doors and increase transparency in the bond market, and generally being less concerned about the health of the overall economy than their balance sheets.“I saw more bankers looking out for their self interest in my last years at the MSRB,” he told
Bloomberg. “The attitude had changed from, ‘What can we do for the good
of the market,’ to, ‘What can we do to ensure the future of my business.’ The profit wasn’t in the underwriting, it was in the swap.”
This story should be put into the fat file called “Why Self Regulation Doesn’t Work.” When that question is answered by the guy who was supposedly in charge, the need for real regulations seems pretty damn obvious.