Watch the great Cicero and the brilliant Kelly Coughlin debate municipals bonds versus bank owned life insurance (BOLI). Part 4 topic: Cost to Dispose and Liquidity

And now we begin Part Four of Debate in Rome. The subject today is Cost to Dispose and Liquidity, Cicero versus Coughlin, Munis versus BOLI. On the subject of Cost to Dispose and Liquidity, Honorable Cicero, the floor is yours.

Cost to Dispose and Liquidity: Nearly a million muni bonds are bought and sold every month representing nearly one quarter of a trillion dollars. There is always a ready market for any bank who desires to liquidate their positions.

Cost to Dispose and Liquidity: As the honorable Cicero well knows, any asset is for sale at any time…but at what price. Yes, there is liquidity but at what price when you include hidden markups and markdowns. BOLI can be liquidated at no fee, but the accrued tax and an IRS penalty of 10% similar to the early withdrawal of an IRA or 401k. Not encouraged, but certainly an option to a bank that needs liquidity.

On the subject of Cost to Dispose and Liquidity, by a show of hands who thinks Municipal bonds are better?

Who thinks BOLI is better? BOLI and Munis are tied. They each get one half point.

Well that is it for the first four rounds of the Muni vs BOLI debate. The score now is: BOLI 3 1/2; Munis 1/2 with BOLI winning the Diversification, Balance Sheet Risk and Cost to Acquire categories; and tying on Disposal and Liquidity category.

Well that is it for Round One of the Muni vs BOLI debate. The score now is: BOLI 3 1/2; Munis 1/2 with BOLI winning the Diversification, Balance Sheet Risk and Cost to Acquire categories; and tying on Disposal and Liquidity category.

Our next Muni vs BOLI debate will cover the following topics: Interest Rate Risk, Credit Risk, Duration Extension, Customer Service. It should be an interesting debate, Coughlin guarantees that he and his Equity Alliance team will crush Cicero’s Muni side on Customer Service.

Contact Kelly Coughlin, CPA and CEO of BankBosun. Sign up for free podcasts at BankBosun.com