Professor Mitchell Moss writes in support of a bailout of dumb transit agency leaseback deals that have gone sour, arguing that yes they screwed up but bearing the costs of that screw-up would be too harmful:
As the nation climbs out of one of its toughest economic crises ever, we cannot be lulled into thinking the problems caused by imprudent financing techniques have vanished. Yes, the transit groups were unwise to get involved in the leasebacks, but that’s no reason to let banks continue to exploit loopholes in them at the expense of transit riders. Congress must act to protect commuters and taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. payers from this insidious legacy of a careless period in American finance.
The bailout bill is sponsored by Sen. Robert Menendez (D-NJ) and Rep. John Lewis (D-GA). We’ve heard it before: they screwed up but the risks are so great that we need to let them off the hook. In the larger piece we did on these transit agency leasebacks, and in a subsequent blog post, I talked about other options beyond just making it all go away:
- A first step is that every transit agency needs to come forward publicly with what they owe and to whom they owe it. (Some have thus far refused to disclose despite asking for a bailout.) The Hartford Business Journal has an excellent editorial outlining the reasons for disclosure.
- It would also be nice if every transit official who agreed to the termination fee clause in these contracts, while fully knowing that they could never perform, be fired.
- If transit agencies need additional funding (including covering their liabilities), it should go through the normal appropriations process for better transparency and to avoid giving benefits only to agencies that entered into these dumb agreements.