NJ Gov: muni ratings "valid"
NEW YORK (Reuters) - New Jersey Gov. Jon Corzine on Wednesday said a different rating scale for municipalities is "valid" and there is value in bond insurers as long as they stick to the original model of insuring only municipal bonds.
"It's a little hard to take a general taxing authority and compare it to a private company," Corzine told Reuters in an interview.
"I do think that there is a different scale that is valid. That doesn't mean there is full recognition of the economic strength of a lot of states and municipalities. The level of default is significantly different," the Democratic governor said.
Corzine, a former chief executive officer of Goldman Sachs Group Inc, supported a dual bond rating system that holds municipalities to a higher standard than corporate issuers even as officials from other states on Wednesday called on rating agencies and lawmakers to eliminate it.
Officials from California, Connecticut and Pennsylvania testified before the U.S. House of Representatives Financial Services Committee that rating agencies should create a unified system, which could in some cases eliminate the need for bond insurance.
Corzine said bond insurers have lowered borrowing costs for municipal issuers but the value of that insurance has declined as guarantors expanded their business model to backing other securities. Insurers are known as "monolines" because originally they only guaranteed municipal bonds.
"I think there is a reason to be for the monoline efforts," but the companies have to "stick to their knitting," Corzine.
(Reporting by Anastasija Johnson; Editing by Jonathan Oatis)
