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Finance: What is a Moral Obligation Bond? 7 Views


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Description:

A moral obligation bond is a bond that is paid or backed by a well-heeled, better funded entity should the bond default.

Language:
English Language

Transcript

00:00

Finance allah shmoop what is a moral obligation bond So

00:08

one of our writers totally messed this one up and

00:10

we started a video about promises to pay dentists So

00:14

a moral obligation bond is one that gets paid because

00:17

well you have good morals or you feel morally obligated

00:20

to pay hey if you don't necessarily legally have to

00:23

pay it but you're morally obligated Teo do so let's

00:28

think about this Hospitals universities do gooder projects of all

00:32

shapes and sizes that is on a lone dusty highway

00:36

west of omaha a tiny city wants to build a

00:38

trucker parking hub with excellent hot dogs clean ish showers

00:43

and a mud flap emporium They need three million bucks

00:45

to build this thing for the kindly loving truckers while

00:48

it's still human beings doing nothing and well on their

00:52

own city can't afford it the state realizing how good

00:55

this depot would be for commerce in business coming into

00:58

and out of the state they decide to guarantee the

01:00

bonds of that little city The city is backing it

01:03

without reams of paper a forest full of paper sign

01:06

contracts or any other major structural legal limits in practice

01:10

The bonds air publicized as a gift to the area

01:14

and they create extreme embarrassment to the politicos who backed

01:17

it Should that bond ever fail That is whoever's managing

01:21

the facility and supposed to collect the you know shower

01:24

tuition from the truckers stops collecting it and or the

01:27

truckers find somewhere else to go with mohr cleanest showers

01:30

or this is a municipal moral obligation bond but the

01:34

term applies to bonds that are not government backed as

01:36

well The holy rollers church of greater baltimore is raising

01:40

money to replace all the stained glass windows that have

01:43

been broken by you know errant baseball's from the neighboring

01:46

field They get each of their congregants toe loan the

01:49

church three grand and no they're not passing contracts along

01:53

with the collection plate there's nothing in writing saying that

01:56

the church will use that money to replace the windows

01:59

they promised or because the members let the church get

02:02

their dough back The church has a moral obligation to

02:05

pay back the money that they were loaned to make

02:07

good on their promise and if they default well they'll 00:02:10.823 --> [endTime] have to answer to the big guy in charge

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