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Bond
Crisis could sink US Cities
by
John Byrne
A new disaster is looming,
according to a prominent market research analyst.
Meredith Whitney, a financial analyst who runs her own consulting firm
and correctly predicted
the major debt fallout of Citigroup, warned in a little-reported on
interview Sunday that as many as
100 US cities face default on their municipal bonds.
Cities and states issue bonds to pay for public services. The trouble
is that municipalities are no longer
collecting enough in taxes to meet their budgetary needs. According to
a 60 Minutes report Sunday
-- which received almost no attention by the popular press -- US
cities have spent nearly half a trillion
more than they've collected in taxes, and face pension shortfalls of $1
trillion. Video of the CBS piece follows this article.
"Next to housing this is the single most important issue in the US and
certainly the biggest threat
to the US economy," Whitney told a CBS 60 Minutes' interviewer Sunday
night.
"There's not a doubt on my mind that you will see a spate of municipal
bond defaults. You can see
fifty to a hundred sizeable defaults – more," Whitney added. "This will
amount to hundreds of billions
of dollars' worth of defaults."
Whitney became a household name in the investment community after
issuing a dire report on Citigroup
in 2007, prior to the global credit crisis. She predicted the bank
would face a whopping credit crunch
-- which it did -- and cut its dividend -- which it also did. The
bank was subsequently forced to accept
a massive government bailout.
Citigroup holds the most municipal bond debt out of all the banks in
the US.
"Detroit is cutting police, lighting, road repairs and cleaning
services affecting as much as 20% of
the population," the Guardian's Elena Moya noted late Monday, writing
about the 60 Minutes piece.
"The city, which has been on the skids for almost two decades with the
decline of the US auto industry,
does not generate enough wealth to maintain services for its 900,000
inhabitants."
The problem here is very simple: The super-rich got tired of paying taxes so they bribed
the politicians (it used to be just the Republicans) into giving them a special status to pay
less in taxes so there's not enough money to keep the government running.
The article went on to say this:
The New York Times reported on the affluent New York county of Nassau, where a Republican county
executive -- "who won one of the first upsets of the Tea Party era" -- came into office and promptly cut
taxes without trimming public benefits or services. Nassau's deficit now approaches nearly $350 million.
So, any handjob who says "Let's not fund the government" gets elected and for that I blame the Democrats.
By refusing to list the facts, they've allowed ignorance to rule the day.
Somebody has to pay the bills - why the the super-rich with all their billions?
Our president, to save his political bacon, joined the tax-cutters and now the problem is worse.
Too bad Al Gore chose not to fight for his country in 2000.
Too bad John Kerry chose not to fight for his country in 2004.
Too bad Barack Obama chose not to fight for his country in 2010.
Oh well, at least Obama made Grover Norquist happy.
