The Smell of Panic in the Morning

Robert Duvall in Apocalypse Now? Oh, right, that was napalm. But the financial equivalent is hitting Wall Street this morning with the news that JPMorgan Chase & Co. is taking under Bear Stearns for a measly two bucks a share. Bear Stearns was trading just below 60 at Thursday's close, but the stock price was cut nearly in half Friday when the investment bank announced that its short-term creditors were fleeing en masse. Shareholders are now looking for the nearest window from which to jump. It's a good thing Maine keeps windows close to the ground.

My concern has been that Maine will be going to market in June with general obligation bonds. Don't forget, we voters approved $265 million in new borrowing in 2007, half in June and half in November. Legislators had cleverly spread the package over two ballots so that we would perhaps not notice how big this number really is. Another $30 million on the June 2008 ballot will be the icing on the cake.

The bonding authority granted by the voters has triggered the issuance of Bond Anticipation Notes (BAN) to begin funding the projects sold on the ballots. The BANs will then be redeemed with the proceeds from the annual GO bond auction. With interest rates for municipal bonds going through the roof, my personal opinion is that we should be putting our capital projects on hold until the credit markets settle down. I have e-mails in to the State Treasurer and the Chair of the Legislature's Appropriations & Financial Affairs Committee requesting information about the upcoming June issuance. As they reply, I shall keep you posted.