CDR

Regulator Who Regrets "Silence" About Derivatives Told To Shut Up

Moe Tkacik | March 26, 2009, 2:55PM

Yesterday Christopher "Kit" Taylor, the former executive director of the Municipal Securities Rulemaking Board, became one of the few regulators to publicly apologize for his role in the crisis. Like many public officials, he worried for years about the explosion in the unregulated derivatives market, which he was in the unique position of seeing bankers pawn off on slightly less sophisticated investors than the usual hedge fund guys: school districts, park authorities, power companies and other local government entities. Today Detroit, Jefferson County, Alabama and various towns in California alone are out more than a billion dollars after investing in interest rate "swaptions" and other financial "products" that left them on the hook in a national conspiracy through which banks, lawyers, consultants and corrupt politicos bilked as much as $4 billion a year from state and local government coffers. But "the big firms, he told Bloomberg yesterday, "didn't want us touching derivatives...they said, 'Don't talk about it, Kit.'"

"Every time I talked to the board about swaps, I made it clear that the MSRB had no authority to take action," said Taylor, in an e-mail. "My 'regret' is that MSRB would not speak out loudly that swaps were going to cost taxpayers a bundle if issuers did not clearly understand what they were doing."

Perhaps as penance, Taylor has been a main source for most of the media coverage of municipal finance corruption, currently the subject of a federal probe, and his candor has been hailed by his former colleagues in financial regulation, oh wait not really.

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Topics: Bill Richardson, CDR, Christopher "Kit" Taylor, Muncipal bonds, Tim Geithner