×

Treasury Protests NYT Report on 'Build America' Bonds

The U.S. Treasury was not happy with The New York Times Wednesday.

The New York Times building.
AP
The New York Times building.

A high-ranking Treasury official fired off a stern letter to the editor of the Times late in the day complaining about a page one article on the federal government’s “Build America Bonds” program.

In the story, the Times wrote that “questions about this multibillion-dollar program are piling up.”

“For one, Wall Street banks are charging larger commissions for selling Build America Bonds than they do for normal municipal bonds, increasing the costs to the states and cities,” the Times said.

But in the letter to the editor, Treasury Assistant Secretary Alan Krueger said that’s not a fair criticism, and that the story “paints a misleading picture.”

Krueger dismissed the complaint that banks are charging larger commissions: “While this was true when the program first started, [Build America Bonds] underwriting fees have dropped over time and in the past few months have been in line with those for tax exempt bonds,” Krueger said in the letter.

A spokesperson for the Times did not immediately respond to a request for comment.

The full text of the letter is below.

To the editor:

“Stimulus Bond Program Has Unforeseen Costs” (front page, June 16) paints a misleading picture about a successful Recovery Act program, Build America Bonds (BABs). BABs have proven to be an effective financing tool that has enabled municipalities to attract new investors and fund critical infrastructure projects.

The article argues that “Wall Street banks are charging larger commissions for selling Build America Bonds than they do for normal municipal bonds.” While this was true when the program first started, BABs underwriting fees have dropped over time and in the past few months have been in line with those for tax exempt bonds.

More importantly, BABs have saved money for taxpayers in virtually every state, even taking into account underwriting fees. BABs issued to date have saved state and local governments more than $12 billion in borrowing costs, which exceeds the subsidy cost to Treasury.

The Administration is constantly looking for ways to improve the BABs program, but it is important that we not throw out the baby with the bathwater.

Alan B. Krueger

Assistant Secretary for Economic Policy and Chief Economist, U.S. Department of the Treasury