Late summer is typically a quiet (and humid) time in the nation’s capital, but this August has been busier than normal. From a downgrade on federal debt and the Jackson Hole Symposium, to a potential SCOTUS case questioning the sequestration of Build America Bonds (BAB) refund payments and the SEC’s cybersecurity rule; here’s a quick recap of what’s been happening this August.

• 🏦 Big Story: Downgrades: Fitch Ratings started off the month with a major announcement that the firm downgraded the U.S. federal government’s long-term credit rating from AAA to AA+. In early June, NABL debriefed members on the bipartisan debt deal, which suspends the debt ceiling through January 1, 2025. While the deal averted the immediate risk of a default on Treasuries, it did not assuage at least one rating agency’s long-term outlook concerns. Fitch specifically cited “repeated debt-limit standoffs and last-minute resolutions” as factors contributing to its decision to downgrade. Read more on the debt ceiling and downgrade here. Several mid-sized banks also faced ratings changes this month when Moody’s announced it would downgrade 10 banks in early August, followed by S&P’s decision to downgrade several others a couple of weeks later.

• 📈 Fed Taps Brakes on Economy Again: The Federal Reserve’s Federal Open Market Committee (FOMC) voted on July 26 to increase rates by another 25 basis points after forgoing a rate hike at its June meeting. July’s rate change marks the eleventh increase since March 2022 and signals the central bank’s resolve to curb inflation. Central bankers and economists from around the world met later in the month at Jackson Hole, Wyoming for an annual economic policy symposium. Each year, the Jackson Hole meeting is a who’s who for monetary policy experts. This year’s meeting yielded a resolute message from most attendees: central banks will continue with measures to bring inflation fully in check “until the job is done.” Many economic indicators suggest the Federal Reserve’s economic tightening has worked to tame inflation and that prices in many sectors have cooled. Still, prices in certain sectors of the economy, particularly housing, remain persistently high and may have already resumed increasing despite a tightening mortgage market.

• 🌦️ Checking the Temp on ESG: Three words: Environment, Social, and Governance (ESG) have dominated a lot of discussions inside the Beltway this year— from Securities and Exchange Commission (SEC) proceedings, think tank roundtables, and even a month of congressional hearings dedicated to the topic. An increasing amount of polling data, however, suggests that the topic may not be coming up at American dinner tables. Long story short, the general public appears to care less about ESG than politicos from both sides of the aisle may have initially thought. Members of Congress have a long list of to-do items when it reconvenes in September. These recent polling data points may have at least some rethinking where ESG should fall on that list. 

• 🏛️ BAB Issuers May Get their Day in Court: A group of statewide municipal power entities filed a petition for a writ of certiorari for the Supreme Court to hear their appeal in a case of potentially major consequence to issuers of Build America Bonds (BABs). Indiana Municipal Power Agency v. United States examines the federal government’s decision to sequester refund payments to issuers of Build America Bonds (BABs) starting in 2013 and continuing through present day. NABL joined a number of municipal market groups in filing an amicus brief in support of the Supreme Court granting cert for the case. Read more >

More Updates

• 🔐 SEC Finalizes Cybersecurity Rule: On July 26, 2023, the SEC promulgated its final cybersecurity rule, which mandates that registrants disclose material cybersecurity incidents they experience and disclose on an annual basis material information regarding their cybersecurity risk management, strategy, and governance. While the rule focuses on corporate market securities, it could have implications for municipal disclosure in the future. Read announcement >
• 🔎 SEC Recordkeeping Inquiry: The SEC charged 11 broker-dealers on August 8, 2023, for failure to maintain and preserve electronic communications sent through personal devices on off-channel platforms such as iMessage and WhatsApp. Read announcement >