Tax-Exempt Corruption: Exploring Elements of Institutional Corruption in Bond Finance

Posted: 30 May 2013

See all articles by Zachary Fox

Zachary Fox

Harvard University - Edmond J. Safra Center for Ethics

Date Written: May 30, 2013

Abstract

This paper will apply the theory of institutional corruption to the world of private-activity bonds, which offer private entities access to tax-exempt borrowing, which generally provides lower interest rates. The bonds are issued by a public authority that requires the funds be used for a purpose that serves the public benefit. There is a long history of corruption in the bond market, the latest development being a 2011 Department of Justice investigation that exposed rampant bid-rigging by Bank of America, J.P. Morgan Chase and others. This paper will focus on bonds used for affordable housing, and explore whether the theory of institutional corruption might apply to either housing bonds or tax-exempt bonds writ large. Readers with real estate backgrounds should take care to note this paper, and institutional corruption theory, allege no impropriety whatsoever.

Keywords: Institutional Corruption, Affordable Housing, Tax-Exempt Bonds, Housing Finance Authority, Private-Activity Volume Cap

Suggested Citation

Fox, Zachary, Tax-Exempt Corruption: Exploring Elements of Institutional Corruption in Bond Finance (May 30, 2013). Edmond J. Safra Working Paper No. 12. Available at SSRN: https://ssrn.com/abstract=2271667 or http://dx.doi.org/10.2139/ssrn.2271667

Zachary Fox (Contact Author)

Harvard University - Edmond J. Safra Center for Ethics ( email )

124 Mount Auburn Street
Suite 520N
Cambridge, MA 02138
United States

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