Fortunately, selling municipal bonds to individuals was a straight-forward business and if you know what you were doing, and I did, you could get quality bonds for your clients and make something for yourself. Inter-Mountain Power Authority was building a whole lot of coal fired power plants in Utah, I think, and all the electricity they generated went to the City of Los Angeles Municipal Power Company under what was known as “Take or Pay” contracts. That is you have to pay for the power whether you take it or not.
Because they have their own municipal power authority, Los Angeles can’t be held up at gun point by the utility companies. I sold lots and lots of Inter-Mountain Power Authority, which were “double, double AA rated” — that is both muni bond rating agencies gave them a double A rating.
Of course, like everything on Wall Street or “the Street”, (the generic term in the financial world for the brokerage business no matter where one’s office is located), a person bent on chicanery could pull it off with ease. These guys would sell crap. The lower the rating, and the more chance a bond could default, the higher the spread, or commission.
[Image courtesy of the FanShare.]