Fast Track: Pushing bonds to those bailing out of stocks

As the stock market continues to gyrate, more individual investors are searching for less volatile places to put their money.

It’s just at this opportune moment that Micah Green is taking over the reins of the Bond Market Association as president, replacing Heather Ruth, who has retired.

Mr. Green, 43, has been with the New York-based lobbying group since 1987, when he joined the Washington office. He headed that office from 1990 until 1999, when he became chief operating officer, representing the industry during a time when it faced increased government regulations as a result of bond trading scandals at what was then Salomon Brothers.

Before joining the trade association, he was tax legislative counsel for MCI Communications Corp. in Washington, and he was staff director and general counsel of a subcommittee of the now-defunct House Post Office and Civil Service Committee.

Marc Lackritz, who headed the Washington office of the Public Securities Association – as the BMA was known then – hired Mr. Green in 1987. “He’s indefatigable,” says Mr. Lackritz, now president of the Securities Industry Association. “He’s never going to be outworked by anybody.”

The BMA’s member companies account for more than 95% of the nation’s fixed-income underwriting and trading.

Though its members are bond dealers, Mr. Green wants the organization to serve as a forum for educating individual members of the public about bonds. “The public really doesn’t understand the bond markets,” he says.

But in the current market climate, “even retail investors are waking up and saying, `Comparing total return in the bond markets to total return in the stock markets, maybe it’s time to look at the bond markets.”‘

The number of hits on investinginbonds.com, a retail investor-oriented website the group operates, has increased substantially in the last couple of months, Mr. Green reports. “Balancing one’s portfolio and managing risk is increasing in priority, and people are looking to the fixed-income market, the bond market,” he says.

The Bond Market Foundation, a BMA charitable foundation, also operates tomorrowsmoney.org, aimed at teaching women and young people how to save and invest, and the organization is raising money for a Spanish-language version of the website.

Initiative

The association’s most important initiative in helping to educate the public is an effort to provide access to pricing information on corporate bonds. It is working with the National Association of Securities Dealers and hopes to get such a transaction-reporting system up and running by the first quarter of next year.

The Securities and Exchange Commission required the system to be developed in the wake of reports that investors, lacking information on pricing, were paying different prices for the same bonds.

At the same time, Mr. Green has other priorities for the trade group. Its online committee is developing technology to allow for more interaction in online bond trading.

“Whether you’re a retail investor or a sophisticated investor, there are [too many] limitations” to online bond trading, Mr. Green says. “We need a common protocol. It will open the way for broader development of trading.”

In addition, the bond market has become a global industry. To respond, the group recently added a London office to the offices it already has in New York and Washington. The association has about 80 employees in the three offices.

better climate

Mr. Green takes credit for changing the political climate in the bond industry following the Salomon Brothers scandal. “We’ve had to re-educate Congress about the benefits of municipal bonds,” he says. “Recent tax bills have been very pro-municipal bonds.”

A BMA-supported provision in the Tax Relief Act signed this month by President Bush creates a new category of tax-exempt private-activity bonds – about $2.8 billion per year worth of bonds for school construction and repairs.

BMA is also playing a role in the debate about how quickly to pay off the $4 trillion in public debt. Democrats have been pushing for paying off more debt faster, while Republicans have been arguing that doing so may cost the government more money than it is worth.

“At some point, it doesn’t make sense for the Treasury to pay a premium” to get back debt held by the public, Mr. Green says. But, he adds, when the baby boomers start to retire, the government’s debt load will start to rise again. “When the money is needed for Social Security retirees, we may be back on the cycle” of rising public debt loads.%