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| Updated 3/24/08 |
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| Individual alternative minimum tax — The individual AMT unnecessarily raises financing costs for AMT bond issuers. The effects of the tax on the municipal bond market have been pronounced with the increase in the number of AMT payers. The tax should be repealed or amended so that it no longer applies to municipal bonds. |
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| Bank-qualified bonds — The ability of small municipalities to issue bank-qualified bonds saves those issuers substantial interest expense. However, the current $10 million annual issuance limit for bank qualified issuers has not been raised since it was enacted in 1986. The limit should be raised to $25 million and indexed annually for inflation. |
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| Tax-exempt financing for sports stadiums — The internal revenue code includes a two-part test for defining public-purpose tax-exempt bonds. However, draft proposals would eliminate the two-part test for bonds used to finance professional sports stadiums, effectively prohibiting tax-exempt financing for stadiums. The proposal would raise costs for states and municipalities without addressing the issue of whether professional stadiums should be publicly financed, would change long-standing tax policy regarding the private use of tax-exempt financing, and should be rejected. |
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| National bond bank — The National Infrastructure Bank Act of 2007 (H.R. 3401 and S. 1926) would establish a new government-sponsored enterprise to issue federally guaranteed bonds to finance state and local infrastructure projects. However, the proposal would add a significant level of federal bureaucracy to state and local decision making and would create significant new contingent liabilities for the federal government. A better approach to federal support for infrastructure investment would be to expand existing grant and subsidy programs. |
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| Definition of market maker — In enforcing markup and other regulations, the FINRA has a two-standard system for "market makers" and non market makers. Generally, the FINRA does not recognize middle-market firms as market makers in the debt markets, resulting in stricter application of regulations. FINRA should be more transparent in defining what constitutes market maker and apply market maker status to a larger universe of dealers. |
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| Regulatory and enforcement environment — The enforcement practices of the SEC and FINRA are overly proscriptive and adversarial. A more cooperative, prudential approach to regulation would reduce compliance costs while improving the ability of enforcement staff to supervise firms under their authority. Such an approach to enforcement has proven successful in the bank regulatory arena and for the securities industry in other countries. |
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| Expansion of TRACE — The FINRA's TRACE system has had some unintended, negative consequences for market liquidity in certain sectors of the corporate bond market. Applying a TRACE-like system to other sectors of the fixed-income market such as mortgage- or asset-backed securities could negatively affect liquidity there, also. Any plan to enhance transparency for mortgage- or asset-backed securities should reflect the unique characteristics of those market sectors. |
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| Expand the role of the Federal Home Loan Banks — Legislation currently pending in Congress (H.R. 2091 and S. 1963) would allow letters of credit issued by the Federal Home Loan banks without threatening the tax-exempt status of municipal bonds. This proposal would help alleviate constraints in the availability of credit enhancement in the municipal market. |
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| Explore the prospect for an alternative trade order management system — Middle-market dealers are hit particularly hard by dependence on the trade order management system of what is essentially a monopoly information vendor. The RBDA should explore alternatives for partnering with a technology provider in developing a less costly alternative. |
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