MTA CFO Responds To New York Times Report

8 days ago I wrote an entry which talked about how the MTA’s global bond investments backfired. The entry was the result of a New York Times piece on how investments in C.D.O.’s (Collateralized Debt Obligations) backfired for many agencies including the MTA. The report has lead to MTA’s Chief Financial Officer Gary J. Dellaverson sending a letter to the New York Times & this is what he had to say:

“From Midwest to M.T.A., Pain From Global Gamble” (“The Reckoning” series, front page, Nov. 2) reports that “New York subway officials were also being wooed by bankers” to pursue variable-rate bonds.

The Metropolitan Transportation Authority has used these bonds to diversify its traditional fixed-rate debt since the 1980s. This mix provides the most cost-effective financing for the M.T.A.’s capital program of more than $23 billion, with variable rate bonds saving the agency nearly $44 million just this year alone.

The M.T.A. did what was prudent for any governmental issuer of its size — it compiled a list of qualified banks, selected not on the quality of the sales pitch, but on market acceptance and ratings of the institution. The M.T.A. currently uses 14 major domestic and international banks in its variable rate portfolio, of which Depfa is but one.

As the M.T.A. continues to grapple with the volatility in the financial sector as well as the impact of the economic slowdown on the “real” economy, it will keep its riders’ interests first and foremost by managing risk with supplier and product diversification.

Gary J. Dellaverson

Chief Financial Officer

Metropolitan Transportation Authority

New York, Nov. 6, 2008

xoxo Transit Blogger

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