Taxpayers also paid banks more to underwrite Build America Bonds, which debuted in 2009 as part of President Barack Obama’s economic stimulus. The program, which expired at the end of 2010, subsidized 35 percent of interest costs on taxable debt.
To sell the new bonds, governments and banks sought out investors who typically held corporate debt, including pension funds and international buyers. That boosted underwriting fees.
“Especially the early deals were fairly labor-intensive,” Decker said. “You had to do a lot of investor education and a lot of marketing transactions to customers that weren’t used to the municipal market.”
In 2012, Bank of America Corp. took the top spot for arranging U.S. muni sales, unseating JPMorgan Chase & Co. Bank of America, the second-largest U.S. bank, managed about $48.7 billion of issues at an average cost of $4.55 per $1,000 of debt, Bloomberg data show.
The company generated about $222 million in revenue from those deals, based on the issuance figures. The Charlotte, North Carolina-based bank bought Merrill Lynch in 2009 after Merrill suffered at least $50 billion in losses and writedowns from the collapse of the U.S. subprime mortgage market.
New York-based JPMorgan, the biggest U.S. bank, arranged about $39.4 billion of muni issues in 2012 at an average cost of $4.69 per $1,000 of bonds, according to data compiled by Bloomberg.
Justin Perras, a JPMorgan spokesman, declined to comment, as did Zia Ahmed, a spokesman for Bank of America.
In muni trading last week, yields on 10-year benchmarks fell to a one-month low of 1.69 percent, Bloomberg Valuation data show.