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NEW: Block Pledges No More Moral Obligation Bonds if Elected

Thursday, May 15, 2014


Rhode Island Republican gubernatorial candidate Ken Block has pledged that under his administration, there would be no moral obligation bonds, saying the 38 Studios bond deal "demonstrates a rigged Wall Street Game."

“Career politicians like using moral obligation bonds because they can spend money on whatever they want without any check or balance by the taxpayers.” Block said. “The corruption around 38 Studios shows exactly why political insiders need moral obligation bonds, because Rhode Island voters would never have approved general obligation bonds for this project. Wall Street insiders use moral obligation bonds to line their pockets at the expense of taxpayers across the country. They charge higher interest on these bonds than on taxpayer approved bonds, and then blackmail governments into treating them exactly the same.”

Block Statemen

The Block camp issued the following statment:

“The use of moral obligation bonds will cease to exist when I am elected Governor,” said Block. “These types of bonds make no sense: Rhode Island is paying a higher rate of interest for no good reason at all. On top of that, moral obligation bonds allow politicians to bypass voters and loan public money to projects that would never gain public approval.

Moral obligation bonds are different from general obligation bonds because the voters of Rhode Island do not approve them and there is no legal requirement to pay them. They are also subject to higher interest rates.

“The rating agencies are claiming that there is no difference between repaying general obligation bonds and moral obligation bonds in terms of the impact on the state’s credit rating,” said Block. “This begs the crucial question: if there is no risk of default, as is the case for general obligation bonds, then how come Rhode Island was not able to borrow at a lower rate of interest, as is the case for general obligation bonds? There is no reasonable answer: this system simply makes no sense.”

Even S&J Advisors, authors of an alarmist report in favor of repayment, acknowledged that “the rates on the 38 Studios Bonds seem quite high (especially for bonds rated AA+ by S&P and Aa3 by Moody’s due to the insurance policy by Assured Guaranty).

Block said that repaying the 38 Studios Bonds is an issue that stretches beyond Rhode Island.

“This issue concerns the borrowing practices of municipalities, counties, and states across the country,” Block said. “We are all playing a rigged game where taxpayers pay higher rates of interest for no justifiable reason. Wall Street has created a system where excessive interest rates are charged and the rating agencies are used to prop up this scam.”

Block also pointed to deeply corrupt practices at the big three rating agencies during the lead up to the financial crisis, as reported by CBS, the New York Times, Business Insider, Huffington Post, and Rolling Stone Magazine.

“It’s very difficult to understand how the rating agencies have retained any credibility in light of their awful performance during the recession,” said Block.


Related Slideshow: 10 Questions Block Has to Answer When Running for Gov of RI

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10. Can Block convince voters he is more than a third party player?


To win in the GOP primary, Block is going to need to convince GOP primary voters that his ideals align with the fundamental beliefs of the Republican Party. 


He did get a political gift.  As GoLocalProv reported - Blocks opponent in the GOP primary, Cranston Mayor Allan Fung has been a consistent donor for a decade to many of the top Democrats in the Party.


Both Block and Fung will be challenged to explain their GOP credentials.

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9. Is Block too much of a techno-candidate?


Block, the founder of a software company, love to talk about technology solutions to public policy problems. He is going to have to define his solutions to problems in a tangible way.  Often, voters connect to simple themes, "Hope and Change" or from "Head Start to Harvard." 


Block is going to need to be able to show he can connect to all Rhode Islanders - we are a retail political state.

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8. Can Block raise money?


Block has demonstrated he is serious about running - he has already invested $500,000 of his own money to win the GOP primary, but he will need an estimated $3 million to win the primary and General Election next November.


To date, his fundraising base has been small and while Fung is no Gina Raimondo in fundraising, he does have a modest Republican fundraising base.

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7. Will Block defend the behavior of National Republicans?


If 15 months from now Ted Cruz works tirelessly to close the federal government over the implementation of Obamacare, will GOP Governor Ken Block speak out on the issue? 


Will Block praise or criticize Cruz? In the primary, conservative voters may want him to praise Cruz and in the General election, the majority of voters may want him to condemn Cruz.

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6. Can Block attract RI GOP leaders?


A few weeks ago Fung announced an advisory group of prominent Republicans.  The announcement gave Fung's efforts some momentum. Block would pick up a lot of credibility if he were to peel some Fung supporters over to his team.


In addition, a number of leading Republicans have yet to make an announcement - if they break to Block it may create momentum.

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5. Can Block connect with voters in the General Election?


Assuming Block beat Fung in a GOP primary and went on to face a progressive Democrat like Providence Mayor Angel Taveras or rising star Clay Pell, can Block work the Greek Festival in Cranston or the Scituate Art Festival as well as these Democrats?


Will undecided voters connect to Block?

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4. Will Block's lack of previous elected office help or hinder?


It can be argued that never having been elected before could be perceived as a negative.


Sure, Governor Don Carcieri was never previously elected to office and Governor Bruce Sundlun had only been elected to the state's Constitutional Congress, but voters may want to be sure that Block will know a federal emergency declaration from a new software version - or will each new storm be deemed Sandy 2.0 and so on.

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3. Is Block the smartest guy in the room?


Make no mistake about it, Block is smart. Business smart, policy smart, but could he be too smart and then not be able to connect to voters.


Bill Clinton was a Rhodes Scholar (so was Gina Raimondo), but one thing about Bill Clinton was that he could play the role of a good ol' boy as good as anyone. He could make any voter feel right at home.


Block will need to channel his intelligence into a language and approach that connects to the CEO he is asking to support his effort as equally as asking a unemployed mom in Pawtucket.

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2. How will he handle the plethora of special interests?


This time Block will have to answer the questionnaire from the FOP, the Right-to-Life groups, the Environment Council, MADD, the Teamsters, The Northern RI Chamber of Commerce, NEA-RI, arts advocacy groups, the NAACP, and you get the picture.


Consistency will matter. One group's endorsement will spark another groups condemnation. Mr. Block, welcome to the 2014 governor's race.

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1. Can he handle the hot lights?


The one thing about being the third or fourth candidate in a race is people remember the smart things you said, but don't pay much attention to the dumb things you said. Heck, you really didn't have a real chance to win so the assessment is not very stringent.


This time will be different. He needs to run not one but two nearly flawless races to be the next Governor of Rhode Island. His effort in 2010 will help him, but this time he has a real chance to win and the stakes are much higher


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Ken Block is doing an excellent job fighting for the taxpayers of Rhode Island!

Comment #1 by Reagan Republican on 2014 05 14

Block is correct legally and in the "moral" sense.

The 38 Studios deal was concocted without the public voting to issue the bond -- unlike general obligation bonds that are put before the voters via ballot questions.

No public vote, but when the deal goes south, the public is the chump on the hook for the loss? I don't think so.

Comment #2 by Art West on 2014 05 14

I agree - they went around the taxpayers with their sleazy moral obligation bond because they knew the public wouldn't buy into it. They should have to adhere to the bond offering stipulations and eat the loss, not us! Anyone who invested knew it was high risk, knew they could lose on the deal and that's what should happen. Heck if you read the offering, it pretty much points out that they had a very good chance of getting nothing for their investment nor were they promised to!

We didn't vote to give it, we should not be held responsible to pay it back. They took a chance ... oh well! That's the life of an investor! One day you win, they next you lose. I'm sure it's not the first bad investment they've ever made in their lives, it's not the last and I'm equally sure their accountants know a few creative ways to write it off in their favor. Let THEM go after whoever to recoup the money - leave the RI TAXPAYER out of it!

There is noting more disgusting than a do-nothing politician lecturing me on what they deem is a "MORAL" obligation! Someone should remind them that their moral obligation is to the taxpayers, not their Wall ST buddies!

Comment #3 by C B11 on 2014 05 15

I've taken issue with Mr. Block in the past. However, he presents many interesting and well thought out positions to improve RI. I am in full agreement with him on not paying the 38 Studio bonds. For this alone, I am giving his candidacy a longer look.

All the "sky is falling" crowd predicting economic disaster for RI are institutional stakeholders. They could care less about the average taxpayer, especially the hired gun - John Simmons. You pay him, he'll say whatever you want, whether true or not (usually NOT).

Comment #4 by Walter Miller on 2014 05 15

@Walter Miller..

My sentiments exactley

Comment #5 by Robert Anthony on 2014 05 15

Mr. Block is doing a good job with rhetoric. It's the simple fact you can't just get rid of all moral bonding on your own in that weak Gov's seat that trips him up. Learn the facts. His lack of any public sector experience is showing big time.

Comment #6 by Brandon Hawk on 2014 05 16


You're right about the lack of power a RI governor has. But, the governor does have the bully pulpit and could make his case to the public if the GA proposed any more moral obligation bonds.

A good governor could be a highly visible advocate for honest government.

Comment #7 by Art West on 2014 05 16

Anybody who buys a "moral obligation" bond backed by the Rouges Island political system out to have their head X Rated. The governor in this hack state only gets what HE wants when the democrats get THEIR beaks wet as well....or... their friends bar rooms rewired. Foxey, FOXEY??? I can't HEAR you.

Comment #8 by G Godot on 2014 05 19

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