SEC crackdown, Trump wealth fund: Top news items for September 2024

October 3, 2024 6:00 AM

Enjoy complimentary access to top ideas and insights — selected by our editors.

September's roundup of top news items impacting the bond markets include the Securities and Exchange Commission's $1.3 million wave of fines against advisors, Trump touting the creation of a U.S. sovereign wealth fund and more.

Longtime Citi banker Archie Chandrasekhar has launched private real estate investing firm Full Moon Capital.

Ex-Citi banker joins advisory firm, launches investment business

Article by Caitlin Devitt

When Citi shuttered its storied public finance division in December, nearly all of the firm's roughly 120 bankers quickly landed new positions in the municipal market. But banker Archana Chandrasekhar hit the pause button for several months and ended up moving in a fresh direction.

"I was so busy for 16 years that I needed to take some time to not be busy," Chandrasekhar said. "When this was happening, I did an audit of myself and I saw this skill set that included the language of very highly rated credits to sub-investment grade project finance."

During her 14 years at Citi, she specialized in higher education, health care and social infrastructure, including transactions like developer-driven public-private partnerships, housing and energy transactions.

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The Securities and Exchange Commission flag flies in front of a building.

The SEC charged 12 municipal advisory firms with recordkeeping violations. They agreed to pay a collective $1.3 million to resolve the charges.

Bloomberg News

SEC charges 12 municipal advisors for recordkeeping failures

Article by Connor Hussey

In a sweeping move, the Securities and Exchange Commission has charged 12 municipal advisor firms with failing to maintain and preserve certain electronic communications, collecting civil penalties ranging from $40,000 to $324,000 for a total of $1.3 million.

That's the latest in the commission's two-year pursuit of "off-channel" communications in the finance sector, this time coming down on MAs after charging groups of broker-dealers, investment advisors, and just last month, credit rating agencies.

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Chicago Mayor Brandon Johnson speaks at the Democratic National Convention in August. Johnson's administration will be tested by growing budget deficits, and the market will be watching to see which solutions it adopts, muni market experts said.

David Paul Morris/Bloomberg

Rising Chicago deficit forecast raises eyebrows in muni market

Article by Jennifer Shea

Chicago released a budget forecast last month projecting that its corporate fund deficit will grow in upcoming years, jumping to $982.4 million in 2025 from $222.9 million at the end of 2024.

The budget from Mayor Brandon Johnson's administration offered downside and upside out-year scenarios: the negative scenario would be a $1.578 billion gap between revenue and expenditures in 2026 and a $1.928 billion gap in 2027. The positive scenario put the gap at $633.8 million in 2026 and $702.6 million in 2027.

Chicago's fiscal picture had improved in recent years, with pandemic relief funding and the city's choice to increase pension contributions bringing a series of rating upgrades.

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"In a matter of months, the Congress will begin a tax debate unlike any in recent memory," said Sen. Ron Wyden, D-Ore.

Bloomberg News

Senators preview coming tax debate, SALT, housing, capital gains on table

Article by Caitlin Devitt

The Senate Finance Committee kicked off next year's looming tax debate in September during a hearing that highlighted the Democrats' priority of eliminating tax-avoidance strategies employed by high earners and the Republican pledge to extend tax breaks built into the 2017 Tax Cuts and Jobs Act.

"In a matter of months, the Congress will begin a tax debate unlike any in recent memory," said Sen. Ron Wyden, D-Ore.

"This will be a make-or-break moment for the federal budget and America's middle class, and the two sides have very different ideas of how to move forward," Wyden said. "The real question is, are the very wealthy going to be taxed on the income they actually enjoy? We're going to have to work through those issues."

Ranking member Sen. Mike Crapo, R-Idaho, said allowing TCJA provisions to expire would "inflict multi-trillion-dollar tax hikes" on Americans. "Given the litany of tax hike proposals on the table from many of my Democratic colleagues, no area is more uncertain as we head into this election than tax," Crapo said.

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Speaker of the House Mike Johnson is urging Republican leadership to move forward and couple the upcoming continuing resolution with the SAVE Act, a bill that would require proof of citizenship in any voter registration.

Bloomberg News

Republicans prep controversial measure to avert government shutdown

Article by Connor Hussey

House Republicans are setting up a bitter partisan fight for their return to the Capitol in mid-September over what exactly will be included as part of a continuing resolution that would keep the government open past Sept. 30, when current spending is set to expire.

Work on that has already begun. Speaker of the House Mike Johnson, R-La., held a call early Sept. 4 among fellow House Republicans on what to include in the bill that is being coupled to the Safeguard American Voter Eligibility Act, a bill introduced by another Louisiana Republican, Rep. Clay Higgins. That bill would require proof of citizenship before registering to vote in a federal election.

"That's clearly a non-starter in the Senate and in the White House so it appears like we're on the verge of some brinkmanship here heading into middle and late September and into election season," said Brett Bolton, vice president of federal legislative and regulatory policy at the Bond Dealers of America. "That'll be interesting how that plays out."

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Former President Donald Trump speaking to the Economic Club of New York

Former President Donald Trump said he would create a U.S. sovereign wealth fund to pay for infrastructure projects if he wins the presidency in November.

Bloomberg

Trump pitches sovereign wealth fund to pay for infrastructure projects

Article by Caitlin Devitt

Speaking earlier in September to the Economic Club of New York, former President Donald Trump proposed the creation of a U.S. sovereign wealth fund to pay for infrastructure projects.

"We'll create America's own sovereign wealth fund to invest in great national endeavors for the benefit of all of the American people," Trump said. "Why don't we have a wealth fund? Other countries have a wealth funds. We have nothing. We have nothing. We're going to have a sovereign wealth fund, or we can name it something different."

Trump did not provide specifics on the proposal and added that the name 'sovereign wealth fund' may not be "appropriate." But the idea would be to create a fund, supported with tariffs on certain goods and other revenue, that would be managed by private managers and make strategic investments in U.S. infrastructure.

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Rendering of proposed arena for Philadelphia 76ers

A rendering of the proposed City Center arena for the Philadelphia 76ers.

76Place

Competition for NBA 76ers arena raises questions of public interest

Article by Christina Baker

The Philadelphia 76ers, like many teams before them, want a new arena.

The NBA franchise has pledged to build a $1.5 billion arena in Center City Philadelphia with no government subsidies, but many Philadelphians remain vocally opposed. New Jersey made a $1.3 billion offer to build the stadium in Camden, right across the Delaware River.

Between proposals from the Sixers, Philadelphia and New Jersey, who's getting a good deal? Economists aren't sure anyone is.

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Mega deals, pre-election push, has Street reassessing issuance expectations for 2024

Article by Jessica Lerner

Robust weekly issuance has become the norm over the past several months, as pent-up capital needs, dwindling federal aid and front-loaded issuance have prompted state and local governments to come to market in earnest.

The pace of issuance is not letting up, leading some strategists to revise their 2024 volume forecasts higher again.

HilltopSecurities recently revised its issuance forecast to $480 billion from $420 billion due to stronger-than-expected economic growth. This is the second revision of the year, as the firm raised its forecast upward at the end of January to $420 billion from $330 billion.

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SEC Commissioner Hester Peirce said she supports the FDTA but singled out the CUSIP vs. FIGI debate as an area that raises questions.

Bloomberg News

Banks hint at legal action over FDTA's move to replace CUSIP identifier

Article by Caitlin Devitt

The American Bankers Association is pushing back hard against a proposed rule for the controversial Financial Data Transparency Act, accusing the Securities and Exchange Commission and other federal agencies of overstepping their authority in seeking to replace the current identifier system for financial securities, including municipal bonds.

The proposed FDTA rule, unveiled Aug. 1, would replace the standard nine-digit alphanumeric CUSIP identifier with Bloomberg's Financial Instrument Global Identifier, or FIGI.

In Sept. 3 letters to the SEC and other federal agencies in charge of FDTA rulemaking, the American Bankers Association, which owns CUSIP, said the agencies have "acted both outside the FDTA's statutory mandate and arbitrarily and capriciously" under the Administrative Procedure Act in proposing the move.

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Tom Doe of MMA says bond issuance will grow

The municipal bond market needs to promote itself to Congress as the chief tool to finance climate-related infrastructure needs, said Tom Doe, president, Municipal Market Analytics Inc.

Infrastructure investors to cities, states: Borrow more, worry less

Article by Caitlin Devitt

As extreme weather becomes more common and the federal deficit hits new records, the onus will be on state and local governments to finance the future of resilient infrastructure. The good news is they have plenty of capacity to take on the debt and retail investors are clamoring for the paper.

That's the view of infrastructure investors who spoke at The Bond Buyer's Infrastructure conference in September.

"We're very under-levered as an issuance community," said Hector Negroni, founder and CEO at Foundation Credit.

"Borrow more — you're not going to get over your skis," Negroni advised issuers, adding they should worry less about potential downgrades and more about the types of projects needed in their communities. "There's a massive pool of demand and you're not being charged for it. The time is now."

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