Alton Drew, Political Analyst
Alton Drew provides political risk analysis in the areas of broadband, cable, media, municipal debt, and telecommunications. Contact him at 404.753.8696 or e-mail us at altondrew@altondrew.com.
IN THE NEWS
Obama budget to emphasize jobs in light of $1.6 trillion deficit
The Obama administration is set to release its FY 2011 budget proposal today at 10:00 am with remarks by President Obama scheduled for 10:45 am.
The budget reportedly amounts to $3.8 trillion projects a deficit of $1.6 trillion, a 23% increase from the estimated deficit in the FY 2010 budget. The projected deficit is about 11% of the United State's gross domestic product.
The FY 2011 budget is to include $100 billion for a job creation initiative. The initiative, annoinced in Mr. Obama's state of the union address, is to include capital gains tax and other tax reductions for small businesses with a focus on incentivizing hiring. The budget will also propose a freeze on discretionary spending, which accounts for 15% to 17% of the budget.
According to the White House, the administration is proposing 120 terminations, reductions, and savings for a number of programs that is expected to amount to $20 billion in savings in FY 2011.
The primary implications of this budget is the potential for crowding out effects and inflation. The U.S. will have to borrow and raise taxes in order to make up for the shortfall in revenues. Lenders may require higher intrest rates in order to lend funds to the U.S. Increased rates will create a shortage of loanable funds, especially for cash-strapped businesses and municipalities.
Source: The Office of Management and Budget
Published: 1 February 2010
Georgia senate committee to consider access charge reform
The Georgia senate regulated industries and utilities committee today met to discuss draft legislation that would reduce intrastate access rates to the level of interstate access rates. No vote was taken today.
Telecommunications companies assess each other an access charge for transmitting and receiving calls between their networks. Intrastate access rates are assessed on calls that begin and end in Georgia while interstate access charges are assessed on calls that bein and end across state lines.
The discussion draft is based on HB 168, a bill that was introduced in the Georgia house of representatives in 2009.
Committee chairman David Shafer (R-Duluth) says that the bill will "level the playing field" while getting rid of regulations that hamper competition. A less regulated environment, according to Mr. Shafer, attracts investment.
The bill appears to have support from a number of telecommunications companies including Cbeyond, TDS, Verizon Wireless, and Windstream. TW Entertainment, a subsidiary of Time Warner, expressed its lack of support of the bill and urged the committee to allow the Georgia Public Service Commission to conduct an impact study of the legislation.
Source: Georgia Senate Committee on Regulated Industries and Utilities
Published: 28 January 2010
City of Atlanta wants to terminate interest rate swap for Series 1999A
The city of Atlanta has given notice that it intends to terminate an interest rate swap agreement with UBS AG for the city's outstanding water and wastewater revenue bonds, Series 1999A. The city will also pay UBS a swap termination fee.
The city cites as a reason for terminating the agreement that one or more termination events may have occurred under the agreement as a result of downgrades of its Series 1999A-1 Hedged Bonds and Series 1999A-2 Hedged Bonds. In addition, the city cited disruptions in the financial markets that have negatively impacted the marketability of variable rate securities; events having a negative impact on the municipal fiance market; and the marketability of Series 1999A Bonds.
The Atlanta city council's finance/executive committee will review the authorizing ordinance on 27 Jabuary 2010.
Source: City of Atlanta
Date Published: 26 January 2010
Democrats plan to amount assault on Supreme Court corporate speech ruling
Democratic National Committee chairman Timothy Kaine yesterday announced the Democratic Party's intent to challenge yesterday's U.S. Supreme Court ruling that removed certain restrictions on the amounts that corporations can spend on funding political messages.
Echoing the sentiments of President Obama, Gov. Kaine (D-Va.) called the ruling a "major victory for oil companies, banks, health insurance companies and other special interests that already use their power over Washington to drown out the voices of regular Americans."
The Court ruling struck down prohibitions against the direct financing of election advertisements. The Court held that under the U.S. Constitution, Congress is prohibited from fining or jailing citizens, or associations of citizens, for simply engaging in political speech.
Prior to this ruling, the Supreme Court held in Austin v. Michigan Chamber of Commerce (494 U.S. 652) that political speech may be banned based on a speaker's corporate identity.
In yesterday's ruling, the Court held that prohibitions on direct corporate financing of electioneering communications amounted to a prior restraint on speech, meaning that a corporation would have to get permission to speak from a government entity, in this case the Federal Elections Commission.
Electioneering communications is defined as any broadcast, cable, or satellite communication that refers to a clearly identified candidate for federal office, made within 30 days of a primary election, and publicly distributed to 50,000 or more people.
This "ongoing chill on speech makes it necessary to invoke the earlier precedents that a statute that chills speech can and must be invalidated where its facial invalidity has been demonstrated", the Court said.
Source: PR Newswire, Federal Elections Commission
Published: 22 January 2010
Illinois consumer advocates want to appeal rate hike
The Citizens Utility Board, a consumer advoctae established by the Illinois legislature in 1983, yesterday announced its intent to appeal a decision by the Illinois Commerce Commission granting Peoples Gas and North Shore Gas a rate increase that would allow both companies to recover a combined $83.6 million in revenues.
The ICC found that Peoples Gas proved the need for $69.8 million dollars in new revenue. The ICC also determined that North Shore Gas proved its need to collect an additional $13.8 million in revenue.
According to the ICC, the new rates will take effect on January 28, 2010 and be reflected on consumer bills in February 2010.
The ICC noted that Peoples Gas' infrastructure was in need of an upgrade in order for the infrastructure to "remain safe, efficient and reliable."
Peoples Gas and North Shore Gas are a part of the Integrys Energy Group which trades on the NYSE under TEG.
Source: PR Newswire, Citizens Utility Board, Illinois Commerce Commission
Published: 22 January 2010
Obama announces bank regulation proposals
President Barack Obama today announced two proposals designed to rein in excessive risk taking by the banks and to protect taxpayers. The proposals, according to Mr. Obama, are premised on the assertion that the financial crisis of the past two years turned into an economic crisis and that commercial and investment banks are still operating under the same regulations that brought the financial system to near collapse.
Prior to today's announcement, Mr. Obama proposed assessing a fee on certain bank transactions in order to collect the remaining funds that were loaned to a number of financial institutions pursuant to the Toxic Asset Relief Program or TARP.
Today's proposals go further. Under the president's first proposal, no bank or financial institution that contains a bank will own, invest in, or sponsor a hedge fund or private equity fund, or proprietary trading operations unrelated to serving its customers for its own profit.
The second proposal limits the consolidation of the financial sector, according to Mr. Obama. Limits will be placed on excessive growth of the market share of liabilities at the largest financial firms.
The next step is to put Mr. Obama's proposal into legislation.
Source: The White House
Published 21 January 2010
Hoyer to outline House agenda for 2010
House majority leader Representative Steny Hoyer, Democrat of Maryland, is scheduled to announce the House's agenda for 2010 on January 26, 2010. Mr. Hoyer is expected to announce that House Democrats will focus on job creation and deficit reduction.
The announcement begins at 9:00 am and will be held at the National Press Club in Washington, DC.
Source: PR Newswire and the National Press Club
Published 21 January 2010
Pennsylvania auditor general wants ban on interest rate swaps
Pennsylvania Auditor General Jack Wagner wants the Pennsylvania General Assembly to ban the use of interest rate swaps. According to a press release issued by the auditor general's office, Mr. Wagner is concerned that thirteen investment banks that have underwritten swaps in Pennsylvania are expected to award over $60 billion in executive bonuses this year.
Swaps are financial instruments designed to protect the purchasers from fluctuations in interest rates. For example, suppose a municipality has borrowed $100,000,000 under a ten year loan at a floating interest rate. If interest rates rise, the municipality is at a significant risk. The municipality can limit its liability by agreeing to a swap transaction with an investment or commercial bank. The municipality would agree to pay the investment bank interest at a fixed rate while the investment bank pays the municipality interest at whatever the floating rate is at the time. If rates rise, the municipality wins. If they fall, the investment bank wins.
According to Mr. Wagner, seven Pennsylvania school districts and municipal governments have lost an aggregate $34 million as a result of bad interest rate swaps. Approximately 107 school districts and 86 local governments are currently in interest rate swap agreements.
Source: Pennsylvania Auditor General's Office and PRNewswire
Published 19 January 2010
For a detailed political risk analysis of this item, contact us at altondrew@altondrew.com or 404.753.8696.
Copyright@2010 Alton Drew Group
IN THE NEWS
Obama budget to emphasize jobs in light of $1.6 trillion deficit
The Obama administration is set to release its FY 2011 budget proposal today at 10:00 am with remarks by President Obama scheduled for 10:45 am.
The budget reportedly amounts to $3.8 trillion projects a deficit of $1.6 trillion, a 23% increase from the estimated deficit in the FY 2010 budget. The projected deficit is about 11% of the United State's gross domestic product.
The FY 2011 budget is to include $100 billion for a job creation initiative. The initiative, annoinced in Mr. Obama's state of the union address, is to include capital gains tax and other tax reductions for small businesses with a focus on incentivizing hiring. The budget will also propose a freeze on discretionary spending, which accounts for 15% to 17% of the budget.
According to the White House, the administration is proposing 120 terminations, reductions, and savings for a number of programs that is expected to amount to $20 billion in savings in FY 2011.
The primary implications of this budget is the potential for crowding out effects and inflation. The U.S. will have to borrow and raise taxes in order to make up for the shortfall in revenues. Lenders may require higher intrest rates in order to lend funds to the U.S. Increased rates will create a shortage of loanable funds, especially for cash-strapped businesses and municipalities.
Source: The Office of Management and Budget
Published: 1 February 2010
Georgia senate committee to consider access charge reform
The Georgia senate regulated industries and utilities committee today met to discuss draft legislation that would reduce intrastate access rates to the level of interstate access rates. No vote was taken today.
Telecommunications companies assess each other an access charge for transmitting and receiving calls between their networks. Intrastate access rates are assessed on calls that begin and end in Georgia while interstate access charges are assessed on calls that bein and end across state lines.
The discussion draft is based on HB 168, a bill that was introduced in the Georgia house of representatives in 2009.
Committee chairman David Shafer (R-Duluth) says that the bill will "level the playing field" while getting rid of regulations that hamper competition. A less regulated environment, according to Mr. Shafer, attracts investment.
The bill appears to have support from a number of telecommunications companies including Cbeyond, TDS, Verizon Wireless, and Windstream. TW Entertainment, a subsidiary of Time Warner, expressed its lack of support of the bill and urged the committee to allow the Georgia Public Service Commission to conduct an impact study of the legislation.
Source: Georgia Senate Committee on Regulated Industries and Utilities
Published: 28 January 2010
City of Atlanta wants to terminate interest rate swap for Series 1999A
The city of Atlanta has given notice that it intends to terminate an interest rate swap agreement with UBS AG for the city's outstanding water and wastewater revenue bonds, Series 1999A. The city will also pay UBS a swap termination fee.
The city cites as a reason for terminating the agreement that one or more termination events may have occurred under the agreement as a result of downgrades of its Series 1999A-1 Hedged Bonds and Series 1999A-2 Hedged Bonds. In addition, the city cited disruptions in the financial markets that have negatively impacted the marketability of variable rate securities; events having a negative impact on the municipal fiance market; and the marketability of Series 1999A Bonds.
The Atlanta city council's finance/executive committee will review the authorizing ordinance on 27 Jabuary 2010.
Source: City of Atlanta
Date Published: 26 January 2010
Democrats plan to amount assault on Supreme Court corporate speech ruling
Democratic National Committee chairman Timothy Kaine yesterday announced the Democratic Party's intent to challenge yesterday's U.S. Supreme Court ruling that removed certain restrictions on the amounts that corporations can spend on funding political messages.
Echoing the sentiments of President Obama, Gov. Kaine (D-Va.) called the ruling a "major victory for oil companies, banks, health insurance companies and other special interests that already use their power over Washington to drown out the voices of regular Americans."
The Court ruling struck down prohibitions against the direct financing of election advertisements. The Court held that under the U.S. Constitution, Congress is prohibited from fining or jailing citizens, or associations of citizens, for simply engaging in political speech.
Prior to this ruling, the Supreme Court held in Austin v. Michigan Chamber of Commerce (494 U.S. 652) that political speech may be banned based on a speaker's corporate identity.
In yesterday's ruling, the Court held that prohibitions on direct corporate financing of electioneering communications amounted to a prior restraint on speech, meaning that a corporation would have to get permission to speak from a government entity, in this case the Federal Elections Commission.
Electioneering communications is defined as any broadcast, cable, or satellite communication that refers to a clearly identified candidate for federal office, made within 30 days of a primary election, and publicly distributed to 50,000 or more people.
This "ongoing chill on speech makes it necessary to invoke the earlier precedents that a statute that chills speech can and must be invalidated where its facial invalidity has been demonstrated", the Court said.
Source: PR Newswire, Federal Elections Commission
Published: 22 January 2010
Illinois consumer advocates want to appeal rate hike
The Citizens Utility Board, a consumer advoctae established by the Illinois legislature in 1983, yesterday announced its intent to appeal a decision by the Illinois Commerce Commission granting Peoples Gas and North Shore Gas a rate increase that would allow both companies to recover a combined $83.6 million in revenues.
The ICC found that Peoples Gas proved the need for $69.8 million dollars in new revenue. The ICC also determined that North Shore Gas proved its need to collect an additional $13.8 million in revenue.
According to the ICC, the new rates will take effect on January 28, 2010 and be reflected on consumer bills in February 2010.
The ICC noted that Peoples Gas' infrastructure was in need of an upgrade in order for the infrastructure to "remain safe, efficient and reliable."
Peoples Gas and North Shore Gas are a part of the Integrys Energy Group which trades on the NYSE under TEG.
Source: PR Newswire, Citizens Utility Board, Illinois Commerce Commission
Published: 22 January 2010
Obama announces bank regulation proposals
President Barack Obama today announced two proposals designed to rein in excessive risk taking by the banks and to protect taxpayers. The proposals, according to Mr. Obama, are premised on the assertion that the financial crisis of the past two years turned into an economic crisis and that commercial and investment banks are still operating under the same regulations that brought the financial system to near collapse.
Prior to today's announcement, Mr. Obama proposed assessing a fee on certain bank transactions in order to collect the remaining funds that were loaned to a number of financial institutions pursuant to the Toxic Asset Relief Program or TARP.
Today's proposals go further. Under the president's first proposal, no bank or financial institution that contains a bank will own, invest in, or sponsor a hedge fund or private equity fund, or proprietary trading operations unrelated to serving its customers for its own profit.
The second proposal limits the consolidation of the financial sector, according to Mr. Obama. Limits will be placed on excessive growth of the market share of liabilities at the largest financial firms.
The next step is to put Mr. Obama's proposal into legislation.
Source: The White House
Published 21 January 2010
Hoyer to outline House agenda for 2010
House majority leader Representative Steny Hoyer, Democrat of Maryland, is scheduled to announce the House's agenda for 2010 on January 26, 2010. Mr. Hoyer is expected to announce that House Democrats will focus on job creation and deficit reduction.
The announcement begins at 9:00 am and will be held at the National Press Club in Washington, DC.
Source: PR Newswire and the National Press Club
Published 21 January 2010
Pennsylvania auditor general wants ban on interest rate swaps
Pennsylvania Auditor General Jack Wagner wants the Pennsylvania General Assembly to ban the use of interest rate swaps. According to a press release issued by the auditor general's office, Mr. Wagner is concerned that thirteen investment banks that have underwritten swaps in Pennsylvania are expected to award over $60 billion in executive bonuses this year.
Swaps are financial instruments designed to protect the purchasers from fluctuations in interest rates. For example, suppose a municipality has borrowed $100,000,000 under a ten year loan at a floating interest rate. If interest rates rise, the municipality is at a significant risk. The municipality can limit its liability by agreeing to a swap transaction with an investment or commercial bank. The municipality would agree to pay the investment bank interest at a fixed rate while the investment bank pays the municipality interest at whatever the floating rate is at the time. If rates rise, the municipality wins. If they fall, the investment bank wins.
According to Mr. Wagner, seven Pennsylvania school districts and municipal governments have lost an aggregate $34 million as a result of bad interest rate swaps. Approximately 107 school districts and 86 local governments are currently in interest rate swap agreements.
Source: Pennsylvania Auditor General's Office and PRNewswire
Published 19 January 2010
For a detailed political risk analysis of this item, contact us at altondrew@altondrew.com or 404.753.8696.
Copyright@2010 Alton Drew Group
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