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First U.S. State Bankruptcy: The Unpleasant Race to it
Wall Street Pit ^ | |Jan 19, 2011, 10:55 AM | Michael Lombardi

Posted on 01/22/2011 1:34:13 PM PST by RC one

Ten U.S. states, accounting for about one-third of the U.S. population, are insolvent. You will find the list of states below.

The question: what state will go bankrupt first?

Technically, there is no legal process by which a state can file for bankruptcy. Chapter 9 of the Bankruptcy Code permits cities and municipalities to file for bankruptcy, but not states. One of the most famous municipalities to go bankrupt was Orange County, California, in 1994. Fifteen U.S. municipalities filed for bankruptcy in 2009 and 2010.

California’s deficit could reach $24.0 billion this year. Illinois deficit sits at about $15.0 billion.

Illinois, which could be the most insolvent state, raised its personal income tax rate earlier this year by a whopping 66%. Illinois is sitting on about $5.0 billion in bills it cannot pay.

Some states are making the hard decisions necessary to remain solvent. A two-year budget plan released by the Texas House of Representatives yesterday calls for the elimination of about 10,000 state-related jobs over the next two years.

According to the Washington-based Center on Budget and Policy Priorities, U.S. states as a whole will have a budget deficit of $140 billion this year.

The U.S. government lent more than $100 billion to a single company, American International Group (AIG), during the credit crisis. AIG is now paying back the government. If push comes to shove, why wouldn’t the federal government lend $100 billion to $200 billion to state governments, asking for repayment over a 20-year period?

Here’s why: AIG could have filed for bankruptcy; state governments have no legal mechanism to do so. Financially troubled states just keep piling on the bills without paying them. They are like interest-free loans from your suppliers. Why borrow money to pay your suppliers if they cannot petition you into bankruptcy?

The total value of the bond market worldwide is about $50.0 trillion. Half of that market is made up of U.S. bonds, $25.0 trillion, of which $2.7 trillion is the size of the U.S. municipality bond market.

The 10 most insolvent U.S. states are: California, Florida, Illinois, Arizona, New Jersey, Michigan, Nevada, Oregon, Wisconsin, and Rhode Island. These states make up about one-third of the U.S. population.


TOPICS: Business/Economy; Society
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soooo, will they get bailed out by Obama and Co. or will they be allowed to go bankrupt? That is the one hundred million dollar question of course. If they go bankrupt, shouldn't that say something about the US's AAA Moody rating. The underlying question then is this, is this is or this ain't a good time to buy gold considering all of this? Or is there something better to look at? This is all quite unprecedented.
1 posted on 01/22/2011 1:34:15 PM PST by RC one
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To: RC one

bttt


2 posted on 01/22/2011 1:36:39 PM PST by Matchett-PI (Trent Lott on Tea Party candidates: "As soon as they get here, we need to co-opt them" 7/19/10)
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To: RC one

FTA The 10 most insolvent U.S. states are: California, Florida, Illinois, Arizona, New Jersey, Michigan, Nevada, Oregon, Wisconsin, and Rhode Island. These states make up about one-third of the U.S. population.

See anything in common here, except for Florida and AZ????

Let em die.


3 posted on 01/22/2011 1:37:30 PM PST by bt579 (Liberals need women dependent and scared so that women, like blacks, will vote Democrat.)
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To: RC one

Democrats = Dig deeper to get out of hole.

CUT ENTITLEMENT PROGRAMS and institute policies that cause illegal immigrants to leave, cut taxes and get government the ‘f’ out of the way.


4 posted on 01/22/2011 1:38:42 PM PST by Danae (Anailnathrach ortha bhais is beatha do cheal deanaimh)
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To: RC one
Let's see now. Elections in 2012. Public employee union members would lose their pensions. Credit markets would be disrupted as municipal bonds turned sour - adding to the existing problems.

Will there be a bailout? Or will the administration choose harsh medicine?

Do we really need to ask? Yes, there will be a bailout. Yes, the dollar will break support and head down. Yes, gold will continue its bull market trend.

5 posted on 01/22/2011 1:40:16 PM PST by neutrino (Globalization is the economic treason that dare not speak its name.(173))
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To: RC one

Hope California goes as soon as possible!!

Fire 2/3 of employees and eliminate state pensions!!


6 posted on 01/22/2011 1:41:25 PM PST by dalereed
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To: bt579

could be the real reason jerry brown is wanting to SHIFT debt and responsibilities for more and more services to local governments from the state...that and to SHAFT them too


7 posted on 01/22/2011 1:42:43 PM PST by ldish (Looking forward to Independence Day)
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To: RC one
Once one goes the rest will fall like dominoes. Invest in guillotines.
8 posted on 01/22/2011 1:46:08 PM PST by VRWC For Truth (Throw the bums out who vote yes on the bailout)
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To: dalereed

I think existing contracts need to be honored but the government gravy train needs to come to an end; furthermore, anything that can be privatized needs to be from garbage pick up to water distribution to prisons to mail delivery to public transport, etc. Privatize everything and let the free market establish prices and wages.


9 posted on 01/22/2011 1:47:29 PM PST by RC one (What!!!!)
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To: neutrino

I’m looking at picking up another 8 sovereigns this month.


10 posted on 01/22/2011 1:48:36 PM PST by RC one (What!!!!)
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To: RC one

No way, wipe put the unions and their contracts and fire at least 2/3 of public employees, eliminating the departments they work for!


11 posted on 01/22/2011 1:51:41 PM PST by dalereed
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To: dalereed

That’s atricky situation. I generally believe that contracts should be honored by all of the people engaged in them. If Ohio or Indiana taxpater, for example, have to bail out the state of california in order for the state of California to honor its contractual obligations, that definitely adds a twist to things. As I said, “quite unprecedented”.


12 posted on 01/22/2011 1:57:12 PM PST by RC one (What!!!!)
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To: bt579
See anything in common here, except for Florida and AZ????

The common link for Florida and Arizona were Charlie Crist and Janet Napolitano. They both were outright morons.

We'll be repairing the damage for years.

13 posted on 01/22/2011 1:57:31 PM PST by Caipirabob ( Communists... Socialists... Democrats...Traitors... Who can tell the difference?)
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To: RC one
One of the most famous municipalities to go bankrupt was Orange County, California, in 1994.

I don't live in CA, so don't know how Orange County is doing today - they surely didn't disintegrate and disappear. They are surely not a pariah and I just wonder if they had any difficulty selling bonds thereafter and at what interest rate. They could pose as poster children for bankruptcies - "See? No one grew two heads or came down with warts!"

14 posted on 01/22/2011 2:02:35 PM PST by Oatka ("A society of sheep must in time beget a government of wolves." –Bertrand de Jouvenel)
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To: RC one

What are sovereigns? A precious metal?


15 posted on 01/22/2011 2:03:15 PM PST by naturalborn
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To: RC one
Pick up this rather smart piece of luggage with 50 gold sovereigns, 25 on either side instead of just 8. The accessories are really good selling points as well.


16 posted on 01/22/2011 2:04:48 PM PST by wally_bert (It's sheer elegance in its simplicity! - The Middleman)
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To: naturalborn

http://en.wikipedia.org/wiki/Sovereign_(British_coin)


17 posted on 01/22/2011 2:08:11 PM PST by RC one (What!!!!)
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To: RC one

Speaking as a resident of what is probably the first State to have to repudiate it’s debt, Illinois, I say let us crash and burn.


18 posted on 01/22/2011 2:09:03 PM PST by Lurker (The avalanche has begun. The pebbles no longer have a vote.)
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To: wally_bert

good luck getting that on the airplane to argentina.


19 posted on 01/22/2011 2:11:19 PM PST by RC one (What!!!!)
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To: Lurker

That might be for the best of course. I think we should consider all aspects of the situation before we start yelling and screaming either way though. There may be big money to be made off of this after all. At the same time, rewarding profligacy is rarely a wise policy.


20 posted on 01/22/2011 2:14:55 PM PST by RC one (What!!!!)
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