In FedFin’s initial analysis of the LIBOR case (see Client Report LIBOR), we forecast the spillover impact on other benchmark indices and the self-regulatory process of setting them.  Client Reports on last week’s hearing (see the REFORM and FSOC series) discussed demands Congress is already making of the FRB and Treasury.  These dealt only in general terms with municipal-bond implications, but the muni arena is heating up this week in light of MSRB and SEC inquiries.  These will spark not only additional legal and reputational risk for affected banks (many of them smaller than those now targeted in LIBOR), but also still more pressure for direct rate regulation.  In this report, we analyze the muni issues presented to date and their impact on broader markets.  Reflecting just how hot the issue is growing, the SEC today issued a report on the overall muni market, setting the stage for additional Commission action in this sector.  We doubt the MSRB’s plans to address rate concerns only through “educational materials” will suffice.

The full report is available to retainer clients.  To find out how you can sign up for the service, click here