In this episode of Full Disclosure, hosts Tyler Traudt and Nina Enholm sit down with Rick White, an independent consultant and veteran of the municipal finance world with over 20 years of experience in underwriting and remarketing tax-exempt variable rate debt. Rick pulls back the curtain on Variable Rate Demand Notes (VRDNs), Tender Option Bonds, and money market eligible products and explains their structure, benefits, risks, and how they've evolved since the 2008 financial crisis.
From his early days on the trading floor at First Union to managing a $30 billion variable rate portfolio at Wells Fargo, Rick provides a front-row view of how the market has shifted over the years. He walks listeners through the mechanics of liquidity facilities, remarketing agents, and the crucial role of bank letters of credit, breaking down complex financial concepts in a clear and candid way.
The episode explores what happened when the auction rate market froze, how banks responded, and why investor trust in liquidity dried up seemingly overnight. The conversation wraps with a look at current rate trends, as Rick, Tyler, and Nina analyze recent charts and discuss what might come next for variable rate debt in today’s market environment.
Episode Charts
Key Takeaways
(1) Lessons from the Auction Rate Crisis: The 2008 financial crisis exposed the fragility of auction rate securities and highlighted the importance of strong liquidity support. Rick recounts how frozen markets forced issuers to pivot to VRDNs, often overnight.
(2) Modern Tools, Smarter Strategy: Post-2008 reforms like EMMA brought much-needed transparency to the market. Today, issuers can (and should) monitor rates across multiple series and remarketing agents to make data-informed decisions.
(3) Variable Rate Debt is Evolving: Despite its complexity, variable rate debt can offer real advantages in the right circumstances. With volatility back in the market, and daily vs. weekly reset modes now diverging by 100+ basis points, the time to re-evaluate strategies is now.
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