Cargo ships off Somalia aren’t the only ones who need to fear piracy. Reuters reported yesterday that rating agency Moodys has followed Standard & Poors and downgraded insurance company Ambac to junk. It appears the conditions for a $400 million termination payment by the Turnpike Authority (enough to ransom all the ships held by Somali pirates, including the three new ones captured yesterday, many times over) to convicted IRS tax cheat and former Nazi slave labor beneficiary Swss Bank UBS are now in place. The payment is on a “swaption” interest rate contract that the Authority entered into to get quick cash in return for a monstrous potential future payment. A downgrade by both Moodys and S&P of Ambac, which insured the ability of the Authority to meet its obligations under the deal, triggers the termination. Similar deals elsewhere have prompted FBI investigations for corruption, but of course that would never happen in Massachusetts.
Alert readers may recall a plan for the Commonwealth to bail out the Authority by guaranteeing the debt — in effect, putting the Authority’s financial dunce cap on every citizen in the state. Read the original documents and some clear interpretation by BMGers here. State House news reported last week, however, that stonewalling bureaucrats and their patrons in the House, who don’t want to disclose the details of the deal, forced Senator Mark Montigny to give them a time out:
The Senate adjourned just before 2 p.m. Wednesday, its only formal session of the week clocking in at under an hour. … [T]he Senate agreed to Sen. Mark Montigny’s request to again delay enactment of legislation putting the full faith and credit of the Commonwealth behind risky rate swap agreements that have backfired on the Mass. Turnpike Authority. Montigny told the News Service he has rarely invoked delay tactics in his 16 years in the Senate but that backing the fragile turnpike’s obligations would set the state up for fiscal disaster. “The pike is sort of like a very addictive drug,” he said. “Somehow, whoever takes over becomes part of the problem.” Montigny said he has demanded, to no avail, details on who signed the rate swap agreements and whether anyone is poised to profit from the turnpike’s distress. The Senate adopted an amendment backed by Montigny when it first approved the bill, but the House struck several key disclosure provisions and the Senate then retreated from the New Bedford senator’s proposal. The bill authorizes Treasurer Tim Cahill to join Patrick administration officials as they attempt to negotiate with the parties involved in the swaptions. The amendment would have prohibited state agencies from entering into rate swap deals, a provision House officials said was too broad. It would have also demanded key disclosures about the turnpike’s rate swaps dating back to 1997. Montigny has now four times blocked final Senate approval of the turnpike legislation, which the House and Senate favor as a hedge against a so-called termination payment, in the hundreds of millions of dollars, that the firm UBS may demand of the turnpike. The bill requires a roll call vote to win final passage, meaning it will not arise until at least next week. …
The case for
cleaning out the pirate lairs dissolving independent authorities, from the Turnpike Authority to the MBTA, just got stronger. Elections may not be the best way to ensure effective government, but they’re the best yet devised.