1. The History of Defaults on Municipal Bonds When and Why? Amar Panchmatia BA 543 Spring 2011

2. What Are Municipal Bonds? Government-Issued Securities Cities, Counties, School Districts, Public Utility Districts, etc. Tax-Exempt Securities

3. So Then, What Are Defaults? When A Debt Obligation Is NOT met The Principal Or Interest Payments Are Not Paid When They Are Due Federal Government-Issued Securities – Considered Free From Risks Of Default

4. So Then, What Are Defaults? Suspension Of Payments Issuers Will Continue Or Resume Paying Debt

5. History Of Defaults Economic Panic And Depression, 1837 to 1843 – Total Indebtedness Of The Default Issuers > 50% Of Municipal Bonds Period After Civil War, 1870s – ~25% Of State And Local Indebtedness Was In Default

6. History Of Defaults Economic Depression, Mid-1890s – 10% Of All Municipal Bonds Estimated To Be In Default Great Depression, 1930s – Estimated Less Than 2% Principal And Interest Past Due In Any One Year

7. History Of Defaults Great Depression, 1930s – However, 10% Of Municipal Had Been Affected By Defaults – By 1933, Actual Accumulated Past Due Interest And Principal Peaked At 16%

8. When Do Defaults Come Into Play? High Growth Areas Periods Of “Heavy Borrowing”

9. When Do Defaults Come Into Play? Periods Following A Downswing In The Economy

10. Whorehouse Bonds Involving Governor Of The State Of South Carolina in the 1870s, Robert K. Scott

11. Whorehouse Bonds State Was Supposed To Have Issued $1.2 Million In Bonds Instead Offered $22 Million Some Bonds Refunded At 50% Face Value Others Repudiated

12. Baby Bonds Involved The Treasurer For The State Of Louisiana In The 1880s Post-Reconstruction

13. Those Who Don’t Learn From History… Orange County, 1994 County Treasurer Bob Citron

14. …Are Condemned To Repeat It? Pippa Malmgren, President And Founder Of Canonbury Group Pippa Malmgren, President And Founder Of Canonbury Group