The other option, however, is far from perfect. A request for proposal process would be a more transparent way of handling these deals, but according to experts consulted in this Bloomberg News article, it's also a more expensive proposition:
Banks have promoted the no-bid method, saying it allows them to get the best prices for issuers by tailoring the debt to specific types of investors.
Bid sales saved issuers 17 to 48 basis points, "on average and all else equal," according to a study published in the Winter 2008 issue of the Municipal Finance Journal. A basis point is 0.01 percentage point.
On $100 million of debt, the savings mean $1.7 million to $4.8 million less interest over the life of a 10-year bond. The research by Mark Robbins and Bill Simonsen of the University of Connecticut in West Hartford cited "almost all studies on this issue."
So what it boils down to is whether we trust our elected officials and government staff enough to let them negotiate deals with bond underwriters? Or are we willing to pay a little more to make sure our leaders are being honest? A third option, which may not even be on the table, is for the State Attorney's Office to be more aggressive about monitoring the conflicts of interest among its elected officials.
