OhioBank's blog

Tale of two bridges

Submitted by OhioBank on Thu, 02/03/2011 - 12:39.

 This short story is to illustrate the difference between monetizing the debt and monetizing an asset. 

A tale of two bridges


Two bridges are needed to be built in Ohio.  One in Richland County and the other in Huron County.  Each bridge costs 10 million dollars.  


Ohio legislators are in charge of the Richland bridge. To built the bridge in Richland County, they decide to start a new bond program.   The bridge will be built by the Ohio Department of Transportation. The bonds are rated for a large fee, by a highly reputable bond rating firm outside of Ohio.  The bonds are sold to investors for the principal of 10 million dollars, plus interest.  


The State Bank of Ohio has control of the Huron bridge. The bridge in Huron County will be financed by money given to the Ohio Department of Transportation by the State Bank of Ohio.  The amount is 10 million dollars.

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