The Economic Expectations of Investors and Municipal Corporate Constituents on Public Entities : How the Legal Framework Guiding Public Finance Diverges from Current Economic Realities

Although the Great Recession had a tremendous impact on private and corporate wealth, the resulting economic conditions created a number of financing problems for public entities. From municipal bond dilemmas to toxic and costly interest rate swaps, this article attempts to put together a broad, but not exhaustive survey, of the number of ways in which the post-recession economic climate has hurt public entities financial positions. Of particular importance to the author is the disjoint behind how the current legal regime treats municipal corporations, a governmental/corporate entity, as compared to a traditional corporation. This disparate treatment leave municipal corporations, which face the same type of economic demands from bondholders as corporations face from equity and debt holders, with significantly less protections from creditors in times of financial distress or insolvency. After outlining and explaining the problems, the author details how courts and legislatures have attempted to solve the same problems in the private sector and formulates legislative and legal strategies for coping with current realities and preventing future public financing crises