Judge Tells Metro And Bank To Deal

Most industries (and families) have been hit by the recent economic turmoil, specifically the global 'credit crunch' (hello, Detroit , are you there?). Among those being effected are many US Transit agencies.

Long story short, most transit agencies through 2003, received capitol funding through 'lease-back' transactions, where the agencies 'sold' much of their assets (read: buses, train cars, etc) to banks and leased those assets back (thus receiving upfront cash, while paying off over time). Banks were encouraged to assist through tax-breaks on the depreciation of the assets. The tax breaks for the banks ended in 2004, though they still held large portfolio's of transit assets.

Many of these transactions are/were insured by AIG. During these past few months, AIG (and most other insurers) credit rating has been downgraded and, without getting into the technicalities of High Finance, the lease-back transactions came into default. Meaning, all the capitol raised initially (when the agency sold the assets to the bank) are now due - not good.

Congress is 'doing what it can' ... though they seem to be more inclined to keep Detroit afloat ... this article is specific to DC ... note how this potential funding gap could effect Inauguration Day (68 days! - yippee!, but also, is telling regarding cash on hand at transit agencies (i.e. they would have to cut service IMMEDIATELY)

Judge Tells Metro And Bank To Deal - washingtonpost.com