By Brandon Moseley
Alabama Political Reporter
While Larry Langford was head of the Jefferson County Commissioner the County’s financial advisers told the commission that the county could save money on interest expenses by switching from boring fixed rate bonds to auction rate bonds where investors bid regularly on the interest rate. Advisers often regularly advised Jefferson County Commissioners to swap bonds for new bond issues. Well every time a bond is rewritten or restructured it generates fees for bond writers and Jefferson County was paying some of the highest fees in the industry. Many of these same advisers were being paid commissions on these deals or were otherwise being compensated for churning new business out of those existing debts. When the economy slowed and suddenly Jefferson County couldn’t make their loan payments the interest rates on those auction rate bonds soared drastically worsening the financial crisis afflicting the chronically overspending county. Eventually the county would go bankrupt on the over $4 billion debt, the Wall Street banks which were selling the massive bond issues would have to assume the liabilities, Jefferson County Commissioner Larry Langford (who had moved on to a new post as Mayor of Birmingham) would go to federal prison, bond dealer Bill Blount also went to prison, as did Al LaPierre who was paid $219,000 by Blount to lobby commissioners for these very lucrative bond swaps.
Congressman Spencer Bachus (R) from Vestavia, whose district includes much of Jefferson County is supporting federal legislation that would hold municipal advisers to a much higher ethical and professional standard. That legislation has passed the House Financial Services Committee. Rep. Bachus is the Chairman of the House Financial Services Committee
According to reporting by the ‘Birmingham News’s Mary Orndorff Troyan, Rep. Bachus said, “Had this section been in effect in Jefferson County years ago, we could have avoided the problem.” The conduct of municipal advisers was addressed in the Dodd-Frank Law. This bill rewrites that section of the law to more narrowly define who would be affected. The new regulations would apply to those people who are being paid to advise local governments and would not apply to board appointees or to persons who are regulated by other federal agencies
The Ranking member of the Committee, Rep. Barney Frank said, “This is not an ideologically divisive issue,” and the bill passed with bipartisan support.
The bill now moves on to consideration by the full House. It would still have to be passed by the Senate and signed into law by the President of the United States.
Congressman Spencer Bachus represents Alabama’s Sixth Congressional District.