Transit agencies face financial damage from AIG collapse

Los Angeles MTA, San Franscisco BART and Muni, D.C. Metro, and 26 other large municipal transport agencies are facing massive financial problems because they all got real clever and did lease-back deals with AIG, selling them their assets, then leasing them back.

Now that AIG has gone kersplat, the agencies must either buy back the assets or find new leaseholders. Either way, it will be expensive and will inevitably lead to cuts in services and increased fares.

Tell me again why selling primary assets to another entity in return for a one-time payment is prudent, or even rational, for a public utility?

The free marketer’s “magic of the marketplace” has cast yet another curse. But you can bet investment banks made millions off it.