Wednesday, November 12, 2008

DC Metro Loan Deal

I've been following this story for a couple of weeks. It seems that the Washington Metropolitan Area Transmit Administration borrowed some money from a bank, and the terms of that loan required the WMATA to have insurance of a certain quality or pay back the loan. The insurance backer was AIG, which had its ratings cut recently, and the insurance provided no longer meets the standards of the loan. Now, Metro doesn't want to live up to the terms it agreed to and wants the government to fix it. Why doesn't Metro simply honor its contract? I guess it is for the same reason that many homes are going into foreclosure, they agreed to terms that they could not live up to. Like many, forces outside of their control lead to a bad situation, but you would think that someone, somewhere would have asked the question, what do we do if our insurance rating is lowered and we have to pay back the loan in full?

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