In 1998, attorneys general from across the country sealed a historic deal with the tobacco industry to pay for the health care costs of smoking: more than $200 billion in just the first 25 years of a legal settlement that required payments to be made in perpetuity.
When politicians wanted upfront cash from the victory, bankers happily obliged. The price? A handful of states promised to repay $64 billion on just $3 billion advanced, ProPublica’s Cezary Podkul reports today in an article co-published with Marketplace.
Podkul’s investigation into more than 100 tobacco deals since the settlement found that they are creating new fiscal headaches for states, driving some into bailouts or threatening to increase the cost of borrowing in the future.
ProPublica’s analysis is the first to measure the magnitude of the high-risk debt involved in the tobacco deals and to calculate how much Wall Street’s deal makers earned. It also shows how much of the tobacco money has been securitized – that is, turned into payments that go to investors. As of this year, at least one out of every three dollars coming in under the settlement is pledged to investors, according to bond disclosures and payment data from the National Association of Attorneys General, which tracks the flow of funds.
Saturday, November 23, 2024
