We rely on municipal capital markets in order to finance our infrastructure, including the roads we drive on, our schools, our hospitals, our airports and our police and fire stations.  Strains in these credit markets have become increasingly evident, with bankruptcy filings by Stockton and other California cities and by Jefferson County (home to Birmingham) in Alabama.

A conference at the Brandeis International Business School, held on August 3, brought together more than 200 academics, practitioners, and regulators to hear and discuss cutting-edge research on municipal capital markets.  The goal of the conference was to bring together academics doing research on municipal markets with practitioners who work in them and regulators responsible for their oversight.  The goal was cross-fertilization, with each group sharing insights that will drive research that combines scientific rigor with power and usefulness in practice.

 

Jim Lebenthal, of the pioneering municipal bond firm Lebenthal and Company, kicked off the program with a breakfast keynote that focused attention on how important municipal markets are for financing things we take for granted, for example the reliable delivery of safe drinking water.  A lunch keynote by Massachusetts Treasurer Steven Grossman (also a former chairman of the Brandeis Board of Trustees) highlighted the importance of disclosure and issuer transparency for the proper functioning of municipal capital markets.

Fourteen research papers were presented at the conference.  Each paper was presented by the author, who was paired with a practitioner who offered their own views on the practical applications and uses of the research.  The papers were divided into seven sessions of two papers each.  Sessions focused on the underwriting process, liquidity and trading in municipal markets, new innovations in municipal capital markets, on financial disclosure by municipalities, the financial crisis, the role of credit rating agencies, and the political economy of the municipal market.

One example of the papers on the program was a new paper by Babson’s Erik Sirri, former Director of Trading and Markets at the Securities and Exchange Commission.  Sirri’s made the first public presentation of a new and highly-anticipated study which shows that the advent of real-time trade reporting has reduced transactions costs in the secondary market for municipal bonds.

Overall the Conference was a great success.  I will close with a comment that we received from an attendee: ‘Let me say this for sure:  On balance, this was the single most substantive conference that I’ve ever seen in my entire career.  I raved about it in the staff meeting at my firm, others heard about it and plan to go next year if there is one.’

Copies of the papers presented and information on the participants can be found here.

Submitted by Daniel Bergstresser, Associate Professor of Finance at the International Business School.


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