Taxpayers Paying $211 Million In Banking Fees For Auctions That Never Occurred

Taxpayers Billed $211 Million in Auction-Rate Failure (Update2)

March 10 (Bloomberg) -- From Carnegie Hall in New York to the Los Angeles bus and subway system, American taxpayers are paying investment banks millions of dollars in fees for bond auctions that never happened.
State and local governments will spend about $211 million this year for the failed sales, based on the 0.25 percent average annual fee charged on the $84.5 billion of outstanding securities, according to data compiled by Bloomberg. The bonds - - long-term debt with interest rates reset through auctions every 7, 28 or 35 days -- typically require issuers pay their bankers even if auctions fail.
Taxpayers continue paying fees to investment banks for the 80 percent of auctions still failing more than a year after the collapse of the market. In February 2008, the banks that supported the market for 20 years abruptly pulled out, sending interest costs as high as 20 percent. Local governments aren’t demanding that fees be eliminated, even though they face a cumulative $47.4 billion budget deficit this fiscal year before receiving federal stimulus funds, the Denver-based National Conference of State Legislatures estimated last month.
“Fees are going to continue until we find a permanent solution,” said Whit Kling, director of the Louisiana Bond Commission. LinkHere