Home | Databases | WorldLII | Search | Feedback Edited Legal Collections Data

Gabaldon, Theresa A. --- "The Sewers of Jefferson County: Disclosure, Trust and Truth in Modern Finance" [2010] ELECD 699; in Mitchell, E. Lawrence; Wilmarth, Jr, E. Arthur (eds), "The Panic of 2008" (Edward Elgar Publishing, 2010)

Book Title: The Panic of 2008

Editor(s): Mitchell, E. Lawrence; Wilmarth, Jr, E. Arthur

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781849802611

Section: Chapter 10

Section Title: The Sewers of Jefferson County: Disclosure, Trust and Truth in Modern Finance

Author(s): Gabaldon, Theresa A.

Number of pages: 30

Extract:

10. The sewers of Jefferson County:
disclosure, trust and truth in
modern finance
Theresa A. Gabaldon

INTRODUCTION

In one sense, the story of Jefferson County's sewer debt is a case study; in
another, it is a morality tale. As a case study, it provides an opportunity to
examine how the subprime mortgage crisis roiled the waters of municipal
finance, contributing to a state of affairs in which governmental issuers of
securities having nothing to do with subprime lending found themselves
swamped with debt service. As a morality tale, it unhappily cautions
against trust at the same time that it reminds us that trust of a sort is an
inevitability of the modern age. As a logical matter, this reminder should
prompt a rethinking of the disclosure to be made in connection with
financings (municipal or otherwise). Perhaps more important, it should
demand a great deal more systemic attention to the development of the
conditions that nurture the trust that must be mustered to make modern
finance continue to work.
The first section of this chapter provides background on what prom-
ises to be the most significant failure of municipal finance in history.
The next examines the disclosures that were and were not made along
this particular road to perdition. There follows an inquiry into the
disclosure and other needs of the various players, followed in turn by
an analysis of the trust and trustworthiness exhibited by some of these
same characters. This analysis suggests that trustworthiness is critical to
...