The brokers are battling with the bankers again, and this time the question involves who gets to underwrite revenue bonds.
The Securities Industry Association - the main trade organization for the brokerage industry - announced today that representatives will meet Tuesday with Comptroller of the Currency John Heimann, who regulates national banks, to dispute a recent ruling from his office in this area.
The Aug. 31 ruling said that a $55.8 million issue of Little Blue Valley Sewer System, Missouri revenue bonds - due to go to market this Wednesday - are general obligation bonds and therefore eligible for banks to bid on.
"As we see it, the banks are trying to cross the Rubicon by administrative fiat," said a spokesman for the SIA. He noted that legislation to allow banks to underwrite revenue bonds failed in the last several sessions of Congress.
Revenue bonds are municipal obligations which ar paid off with fees earned by the entity being financed, such as a toll bridge or a municipal golf course. Banks have been barred from underwriting them, most recently in a 1969 Supreme Court ruling.
However, banks can underwrite so-called general obligation bonds, which are backed by the taxing power of a municipality.
Radcliffe Park, the assoicate chief counsel in the comptroller's office who wrote the opinion, said "Under the banking laws there is such a thing as an indirect general obligation." In this case we are relying on a contract with a number of municipalities who are in effect buying sewer services from a numicipality," he said.