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5 studies on racism, climate change + aging populations



Municipal bonds are loans state and local governments use to pay for everyday expenses and infrastructure projects that can take years to complete. Municipal bonds — also called “munis” — are attractive to some investors because states, counties, cities school districts and other government organizations are unlikely to default. From 1970 to 2016, 0.18% of municipal bonds defaulted, compared with 1.74% of corporate bonds that companies issued, according to the Municipal Securities Rulemaking Board, a non-governmental organization that regulates the market. Another reason investors buy municipal bonds: They typically don’t have to pay federal income tax on interest money they accrue.

The municipal bond market is huge and has grown exponentially in recent decades. There’s about $4 trillion worth of bonds held in the municipal market today, up from $1.2 trillion in 1996, according to data from SIFMA, a security industry trade association that tracks municipal bond data.

Despite a dip in municipal bond issuance around the start of the coronavirus recession, and defaults of some bonds issued by small municipalities — like Terre Haute, Indiana in April — year-to-date there’s been nearly $50 billion more in municipal bonds issued across the country, a 23.7% increase. Municipal bond issuances rebounded in April after the U.S. Federal Reserve said it would buy up to $500 billion worth of bonds from states, counties and cities, which have three years to pay back the Fed.

Covering municipal bonds may seem, at first glance, fun as chewing boiled cardboard. But these financial instruments have a direct effect on the social and cultural character of cities, metropolitan areas, counties and states. Munis may be the reason a new school is built or an aging bridge is replaced. They are also inextricable from local history, politics and forces beyond the control of a particular government — such as systemic racism.

The five studies that follow explore how municipal bond mismanagement can have disparate impacts on different racial groups, how climate change and aging populations affect bond interest rates, and provide insight on how credit ratings agencies — which can save or cost municipalities tens of millions of dollars — assess municipal credit risk.


The Violence of Municipal Debt: From Interest Rate Swaps to Racialized Harm in the Detroit Water Crisis
C.S. Ponder and Mikael Omstedt. Geoforum, July 2019.

C.S. Ponder and Mikael Omstedt argue that glaring examples of racial physical violence in cities, such as police killings of Black men, “are often underwritten by more abstract forms of financial violence.”

They explore municipal debt as “a condition of financialized racial capitalism” by investigating the massive debt the Detroit Water and Sewerage Department had taken on by 2014. Ponder is an assistant professor of geography at Florida State University and Omstedt is a doctoral candidate at The University of British Columbia.

Financialized racial capitalism refers to financial situations or instruments, like municipal debt and bonds, with seemingly neutral elements — such as bond ratings and interest rates — that end up negatively affecting members of a particular racial group, through actions like water shut-offs.

The authors chronicle in detail the mid-2010s saga of the Detroit Water and Sewerage Department. The department was established in 1839 with a $20,500 bond. As the city became a capital of industry, the department expanded to serve emerging suburban communities. Racial segregation entrenched in the 20th century, the result of white flight. The suburbs became largely white, the city largely Black.

“With this pattern of development, Detroit’s suburbs were not only able to avoid taking out debt in the muni-market, they were also able to purchase water from the city at wholesale rates while charging increasingly exorbitant retail rates to their own suburban customers,” Ponder and Omstedt write.

Around the turn of the century, the department agreed to several interest rate swaps. In the 1990s, banks marketed these swaps to cities as a way to hedge risk. Swaps could take a few different forms, but often the way it worked was that a city, or city department, would pay a fixed rate to a bank, which would in turn pay the municipal entity what’s called a floating interest rate that varied based on the London Interbank Offered Rate, “the interest rate at which big banks loan to each other for short periods of time,” the authors write.

If the LIBOR floated above the city’s fixed rate, the city would come out ahead. If the LIBOR dipped below the fixed rate, the city would end up paying the bank more than it would have on the open market. In mid-2012, several large international banks were caught manipulating the LIBOR. American cities had paid some $6 billion more in interest to banks than they should have since the early 1990s, and $4 billion in fees to get out of interest rate swaps.

The Detroit Water and Sewerage Department subsequently took out a $650 million bond to cover early termination fees to jettison its toxic interest rate swaps, according to the authors. Financial trouble trickled down to ordinary Detroiters in 2014 when the department shut off water to 33,000 households owing more than $150, “in an attempt to pay down $561 million of debt incurred by predatory municipal finance deals gone wrong,” the authors write. In 2015, another 23,200 households had their water shut off, and 27,552 households lost their water in 2016.

Ponder and Omstedt call it “financial whitewashing,” with the department focusing on delinquent accounts rather than its own risky debt practices. They further argue that “both the white suburbs and the white state have successfully used the trope of payment delinquency and departmental mismanagement to take over local water governance.” Black Detroiters are “scapegoats” and “the role of finance in the [department’s] insolvency has become exonerated,” Ponder and Omstedt conclude.

Climate change

An Inconvenient Cost: The Effects of Climate Change on Municipal Bonds
Marcus Painter. Journal of Financial Economics, February 2020.

Coastal counties facing rising sea levels pay more in fees and initial yields — which include interest rates — for issuing long-term municipal bonds, finds Marcus Painter, an assistant professor of finance at Saint Louis University. He finds no difference in bond fees and yields among short-term bonds that mature in less than 20 years.

Painter argues that “investors are more likely to account for climate change risk when investing in municipal bonds as opposed to corporate bonds or stocks.” This is because a company can move out of town if the town perpetually floods, but the town can’t move its infrastructure. Painter analyzes a sample of 327,152 bonds worth more than $1 million, 50,914 of them in counties at risk of climate change. Risk of climate change is defined as risk of monetary loss due to sea level rise — think homes and businesses under water — based on 17 at-risk cities such as New Orleans, Miami and Virginia Beach identified in a 2013 paper published in Nature.

“Because climate change risk is causing counties to be negatively affected today through higher debt issuance costs, these counties should be proactive in reducing the amount of damage that sea level rise is likely to cause to their municipalities,” Painter writes.

Aging populations

Aging and Public Financing Costs: Evidence from U.S. Municipal Bond Markets
Alexander Butler and Hanyi Yi. Rice Business Working Paper, January 2020.

Municipal bonds cost more for states with older populations, find Alexander Butler, a professor of finance at Rice University and Hanyi Yi, a doctoral student there. States like Arizona, which have relatively high numbers of people over age 65 compared with states like California, where the population leans younger, may pay nearly a quarter of a percent more in interest. The difference “reflects an additional $71 million in annual interest payment,” the authors find based on their analysis of more than 100,000 bonds issued by state and local governments across the country from 1996 to 2016.

Butler and Yi suggest two reasons for the higher interest rates in states with older populations. First, there’s not as much tax revenue, which governments use to pay bond debts. Older people are less likely to work and less likely to pay income tax. If there’s less tax revenue coming in to pay back lenders, those lenders will want more compensation in case of default in the form of higher interest.

The second reason has to do with pension obligations, which are constitutionally protected in some states. If a fiscal crisis hits, pensioners, who skew older, will get paid over municipal debt holders. So, just like with tax revenue, lenders want to be compensated for taking on more risk of default.

Bond ratings

Reading Risk: The Practices, Limits and Politics of Municipal Bond Rating
Mikael Omstedt. Environment and Planning: Economy and Space, October 2019.

Three credit rating agencies — Moody’s Investors Service, Standard & Poor’s Financial Services and Fitch Ratings — hold the keys to how much municipalities pay to issue bonds. If those agencies determine a municipality is a bad credit risk, that municipality is going to pay higher interest rates on their bonds. If the credit rating agencies determine a municipality is low risk, it will likely pay lower interest on bonds.

Omstedt, the doctoral candidate at The University of British Columbia, explains a paradox in the municipal bond market. In recent decades, the market has become increasingly complex, with varying laws across states and numerous types of issuers — from city governments represented by elected officials to organizations run by people who have been not elected, like water and sewage utilities. One former ratings analyst Omstedt interviewed said “you can’t even compare city to city.” And yet, as Omstedt points out, that is precisely what bond ratings do. They put cities in different geographies with different rules and different structures onto a simple ratings scale so that investors can assess their relative credit-worthiness.

Omstedt conducted 10 interviews with current and former ratings analysts and with 12 financial professionals working in New Jersey local governments. He finds that while municipal credit ratings are certainly based on financial data, such as whether a municipality owes huge sums for employee pensions, they’re also based on subjective measures. Ratings analysts go out to observe economic conditions in municipalities and use those on-the-ground observations to help determine credit ratings.

The final ratings are a product of what the data and observations say about a municipality’s budget flexibility. As Omsted explains, “their search for flexibility is essentially concerned with only one thing: the municipality’s ability to revise all other commitments that could stand between bondholders and the debt service in the event of a fiscal conflict.”

Do Rating Agencies Benefit from Providing Higher Ratings? Evidence from the Consequences of Municipal Bond Ratings Recalibration
Anne Beatty, Jacquelyn Gillette, Reining Petacchi and Joseph Weber. Journal of Accounting Research, March 2019.

The authors examine nearly 6,000 credit ratings for 4,237 muni bond issues in 2008, 2009, 2011 and 2012 in Texas and California, the only two states that provide data on ratings fees. The authors skip 2010 because that’s when two of the major credit ratings agencies, Moody’s and Fitch, recalibrated their ratings scales. The recalibration meant more than 500,000 bonds across the country got better credit ratings without any change to their underlying default risk. Standard & Poor’s, by contrast, didn’t change its credit rating methodology. The authors want to know whether “credit rating agencies receive higher fees and gain greater market share when they provide more favorable ratings.”

For bonds rated by the three major credit rating agencies, fees tracked consistently before recalibration. But in the two years after recalibration, Moody’s and Fitch charged on average 11% higher fees than Standard & Poor’s across the sample of bonds. The authors also find that for single-rated bonds — those that come with a rating from only one of the ratings agencies — issuers are more likely to go with Moody’s or Fitch.

“These results imply that by increasing their ratings, Moody’s and Fitch garnered new customers and increased their fees for both their existing customers and new customers,” the authors write.

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Bad Credit

Is The No Credit Check Loan The Best Option For You? | Branded Voices



If you need extra cash and have considered applying for a loan even with a bad credit score, you might have already heard about the no credit check loan.

Image by Bermix Studio 

Many people opt for a no credit check loan as their last resort. Like any other loan options, a no credit check loan has its pros and cons. Knowing if this is the best option for you allows you to go consider both its advantages and disadvantages. 

But is it your best option? Is there another way to acquire cash without looking into your credit record?

The Advantages

Here are the other advantages of a no-credit loan:

No Credit Checks

You are considering this loan option because the lender will not bother to check your credit report. It doesn’t matter whether you have a good or a bad credit score as long as you are eligible and can comply with their requirements. 

This benefit is one reason why this loan option attracts many borrowers, especially those who don’t have an impressive credit score and those who are still building their credit records.

Other loan options will require you to provide a good reason why you are acquiring the loan. 

For example, lenders will ask you how you will use the loaned money aside from knowing your capability to repay the money you owe.  But with the no credit check loan, lenders will ask you this kind of question during your application. 

The Disadvantages 

Just like any other options available out there for you, a no credit check loan also has its disadvantages. These things may be huge factors for some consumers, while to others, they’re just minor inconveniences you need to deal with. 

Higher Interest Rates

One of the most common and obvious disadvantages of a no credit check loan is its higher interest rate. Since the lenders will not bother looking at your credit history and rating, they will impose a higher interest rate on your loan. 

The higher interest rates imposed are due to risks they take in lending you their money without even knowing if you can pay it back. This is a common rule for all lenders who offer a no credit check loan. 

Required a Minimum Loan Amount 

If you only need a small amount, a no credit check loan may not be the best option for you. Lenders require a minimum loan amount when you apply for a no credit check loan. Most personal loans with no credit check will require you to loan a higher amount than other loan options such as payday loans and single-payment loans. 

May Require A Collateral

Lenders may require you to have collateral as an assurance for the money you are borrowing from them. It is also to secure their part if ever you cannot pay back the cash you borrowed from them. If you default on your loan, the lender will forfeit the collateral. Collateral can be in the form of any valuable assets such as a house, vehicles, and jewelry.

Quick Process 

Another positive thing when acquiring a personal loan with no credit check is the speedy process. You can get the money in just a few minutes or hours as long as you comply with all of their requirements and are eligible for the loan.

Reminders Before Applying for This Loan 

There are things that you should watch out for when opting for this loan type, especially if you do it online, such as:

  • Watch Out For Fake Lenders

This is the risk associated with a no credit check loan. Some criminals use this to lure their victims for phishing and identity theft. Make sure that you choose a legitimate lender and never give out personal information prematurely. It is best to ask someone you trust for a recommendation or for help with securing a loan from a trusted lender.

  • Prepare The Requirements Ahead Of Time 

It is best to prepare all the requirements before applying for the loan to help you acquire the money quickly. Check your chosen lender’s website or print ads for a list of requirements they will need. 

Even though this loan option does not require a credit check, it does not mean you are guaranteed approval. If the lender finds out that you are not eligible for a loan, your application will be denied. 


Asking yourself if a specific loan option is good for you is one of the proper ways to assess if you should apply for it or not. This practice should be observed in applying for no credit check loans and other loan types available. Remember, not all loans are suitable for you. One loan may work better for others but may not work the same for you. Hence, be prudent and choose the loan option that suits best with your financial needs.

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Bad Credit

Learn to avoid these credit card habits before you regret making costly mistakes



Picture used for illustrative purposes only. Many still decide to confront bad credit card habits only after they are thousands of dirhams in debt.
Image Credit: Reuters

Dubai: Many still decide to confront bad credit card habits only after they are thousands of dirhams in debt. Here we discuss some lessons many regretted not learning before making mistakes that proved costly.

Although credit cards offer convenience, security, and rewards, overspending with a credit card and the interest and fees can bury you financially. So it’s important to know whether you possess such habits in the first place.

Four questions to ask yourself first

If you don’t know whether you have a bad credit card habit here are four questions to ask yourself to find out. If the answer to any of the below is yes, you are inching towards a credit card debtpile.

1. Do you pay only interest fees or minimum payments when you send in your credit card payment?

2. Have you ever paid your credit card late because you didn’t have the money for the payment?

3. Do you use your credit card when you don’t have enough cash?

4. When your issuer raises your credit limit, do you spend more because you can?

Bad credit card habits

While common mistakes include habitually paying your credit card late and taking out costly cash advances on your credit card, here are some uncommon-yet-dire mistakes that may slip under any user’s radar.

Habit #1: Missing out unauthorised or fraudulent charges

Keep in mind that one of the main benefits to reading your credit card statement is, it is one of the best ways to catch unauthorised charges and billing errors.

Don’t check your credit card statement for your balance and payment information, review the entire statement to verify your account activity.

By routinely checking your online or physical statement, you can also find out well before hand if your credit limit was lowered since you last checked – as it can change because of your credit habits or your credit history.

Habit #2: Paying only the minimum can cost you dearly

It is evidently easier to make the minimum payment and this is a habit credit card companies profit from as well.

Although paying just the minimum is more convenient than to figure how much extra you can pay towards your outstanding credit card bill, keep in mind that when you’re making only the minimum payment, you’re not making much progress toward paying off your credit card bill.

Moreover, unless you have a very low balance or a zero per cent interest promotion, you’re probably paying much more in finance charges than you have to.

Habit #3: Using your credit card more than your debit card

While it’s recommended you use your credit card to amass cashback rewards or points and also pay off your credit card balance every month, you shouldn’t opt to use your credit card over your debit card, if those aren’t the reasons why you would go about using them.

Your debit card is your direct access to the funds you should use for everyday purchases, like groceries, gas, clothing, and other expenses. If you use your credit card, it should be a decision with a plan for paying off what you’re charging on the card.

Habit #4: If you are transferring balances just to avoid payments

Although promotions like balance transfers are a widely recommended strategy to pay off a high-interest rate balance on your credit card, matter experts reveal that if you’re in the habit of pursuing such promotions to avoid paying payments on your credit card, this leads to amassing long-term debts.

Financial planners reiterate that many don’t realise that balance transfers typically have fees that will increase your overall balance if you’re never making payments toward the transfer. Moreover, if you’re making purchases on the card with such a promotion, the problem gets bigger.

Expert tips to take control of these credit card habits

Lesson #1: Pay your credit card in full each month

The best way to keep your credit utilisation ratio low and avoid costly interest charges is to pay your credit card balance in full each month – which also means you also don’t incur any large due.

It’s effective to control spending by not spending more than you can comfortably pay down each month, as this helps you reduce the likelihood of developing long-running credit card debt.

If you want to take in one step further, setting a monthly spending limit that’s well within your budget increases the chances that you’ll actually be able to zero out your monthly balance and avoid interest charges.

Lesson #2: Keep your credit utilisation ratio low

What it means by ‘credit utilisation ratio’ is essentially the link between your credit card balances and your aggregate spending limit. For example, a Dh2,000 balance on a credit card with a Dh5,000 credit limit equates to a 40 per cent credit utilisation ratio.

As a rule of thumb, your credit utilisation ratio shouldn’t exceed 40 per cent, and keep in mind that high ratios may adversely impact your credit score.

Financial advisors recommend aiming for a 30 per cent credit utilisation ratio, as that gives you some leeway to cover urgent one-off expenses, which can come unexpectedly as a result of maybe losing your job during the ongoing pandemic.

Lesson #3: Setting up customised spending alerts

If controlling your credit card spending is burdening you, it has been widely advised to set up customised spending alerts.

This will let you know when you’ve made an abnormally large payment or exceed a certain balance threshold and you also can pair these data alerts with security alerts to help flag any sham spending patterns.

Lesson #4: Using credit card rewards and points to your advantage

If you have a rewards credit card, you can use it to your advantage. If you have a pure cash back credit card, use any cash rewards you receive to put toward your account balance or directly deposit it into your savings account.

Alternatively, if you have a rewards points credit card, you can use your rewards to buy discounted gift cards to the stores you know, which will help save on future purchases without having to use your credit card.

If not, you could always redeem your reward points for cash redemption to put into savings or towards your account. However, ensure you know when your rewards expire to get the most out of them financially.

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Bad Credit

When Can I Get an Auto Loan After a Repo?



There’s nothing saying you can’t apply for an auto loan immediately after a repo, but the tough part is actually being able to qualify for the loan. Since many auto lenders don’t approve borrowers with a repo that’s less than a year old, you may have to consider in-house financing.

Repossessions and Your Next Car Loan

Unfortunately, most traditional auto lenders don’t work with borrowers that have a recent repo on their credit reports. When we say traditional, we’re referring to lending institutions such as banks, credit unions, online lenders, and the captive lenders of some automakers. These lenders often require a good credit score and clean credit reports.

Where does that leave you? Well, likely in-house financing is the next logical step if you need a car loan after a repossession.

More on In-House Financing

Buy here pay here (BHPH) dealerships use in-house financing. This way of auto financing involves working with the dealer who’s also your lender. There’s no need to find a third-party lender or preapproval – the dealer takes care of all that. This setup can be convenient, and often, borrowers are able to walk away with a vehicle the same day they first set foot on the lot.

Since these dealers may not check your credit reports to determine your eligibility for auto financing, your recent repossession generally isn’t an issue. If you can meet income requirements, prove you have stable work, secure auto insurance, and prove your identity, you might get into a vehicle after a repo with in-house financing.

Here are a few more details on in-house financing:

  • Used cars only – BHPH dealers only offer used vehicles. However, used cars are a good option for bad credit borrowers. They’re almost always less expensive than a brand-new car, and affordable is a good price when you need to get back on your feet after a repo.
  • Anticipate a higher interest rate – Without a credit check, lenders are taking a risk approving a car loan without knowing much about your credit history. To make up for this, they tend to assign higher interest rates. A high interest rate may be considered a good trade-off for an auto loan with bad credit in many cases, especially if you heavily rely on a vehicle to get by.
  • Credit repair may not be an option – If you get an auto loan with a lender that doesn’t check your credit, it’s a possibility that your on-time payments aren’t going to be reported to the credit bureaus. If you want to repair your credit with a car loan, ask the lender about their credit reporting practices before you sign on the dotted line.
  • Down payments are required – Few things are certain in the auto lending world, but one thing you can count on is needing a down payment if your credit is less than perfect. BHPH dealers often require a down payment of up to 20% of the vehicle’s selling price.
  • Prepare your documents – While a BHPH dealer may not check your credit, they’re likely to ask about your income and possibly your work history. You need proof of income to qualify for a car loan, no matter what lender you work with, so prepare at least a month of computer-generated check stubs. If you don’t have W-2 income, have copies of your last two to three years of tax returns.

Looking Forward After a Repo

When Can I Get a Car After a Repo?After one year, your auto loan options open up a little bit more and you’re more likely to qualify for a subprime car loan. Subprime lenders are equipped to assist bad credit borrowers. These lenders offer you a chance for credit repair because they report their loans and work with poor credit borrowers.

If you need a vehicle quickly, a BHPH dealership could be your first step in getting back on the road. Once some time has passed, and your repossession loses some impact on your credit reports, you can try for an auto loan that has the potential to repair your credit.

Here at Auto Credit Express, we know a thing or two about bad credit auto loans, and we have a nationwide network of dealerships that assist bad credit borrowers. We aim to match consumers to dealers in their local area that help with credit challenges. If you’re in need of auto financing, start right now by filling out our free auto loan request form. We’ll look for a dealer in your local area at no cost and with no obligation.

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