Posted on 01/20/2011 6:44:57 PM PST by Bigtigermike
Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.
Unlike cities, the states are barred from seeking protection in federal bankruptcy court. Any effort to change that status would have to clear high constitutional hurdles because the states are considered sovereign.
But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid.
Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides.
(Excerpt) Read more at nytimes.com ...
States share sovereignty with the federal government. It is the prerogative of a sovereign to default and they have no need to declare bankruptcy (nor do I even believe the federal government has the authority to grant it).
Congress better not bailout IL, CA or NY or any of them.
I’ve got a deal for them. We stop sending the feds more than enough to cover the costs of constitutional government. In return they can send us nothing abd we’ll take care of our own issues.
This is series. When the NYT writes it..then other liberal publications and MSM are free to pile on. Merideth was right. There is a big problem and the 800 lb gorilla has been sighted.
If investor speed up their dumping of state and muni bonds it will make it impossible for more states and muni’s to borrow and drive up borrowing costs.
It will be interesting to see what will happens in the market.
The Fed-owning banks own a lof of municipal debt and stand to lose much money through state debt defaults.
Congress is not likely to bail out states directly.
The option remaining is for the Fed to buy worthless state debts, including pension debts, to save the banks' balance sheets.
The strategy is to build support for massive bond purchases by the Fed - something which will not require legislative approval.
Game, set, match. Irresponsible banks sell/dump dump their debts on the Fed which creates money out of thin air, therebyshifting the pain to unsuspecting holders of dollars around the world as that debt is "monetized," the world-wide dollar money supply is inflated, US interest rates are forced to increase, the savings of responsible individuals, banks and governments are devalued, Fed-owning banks and their Wall Street friends are bailed out, states continue their irresponsible spending, politicians are re-elected.
The Fed-owning banks own a lof of municipal debt and stand to lose much money through state debt defaults.
Congress is not likely to bail out states directly.
The option remaining is for the Fed to buy worthless state debts, including pension debts, to save the banks' balance sheets.
The strategy is to build support for massive bond purchases by the Fed - something which will not require legislative approval.
Game, set, match. Irresponsible banks sell/dump dump their debts on the Fed which creates money out of thin air, therebyshifting the pain to unsuspecting holders of dollars around the world as that debt is "monetized," the world-wide dollar money supply is inflated, US interest rates are forced to increase, the savings of responsible individuals, banks and governments are devalued, Fed-owning banks and their Wall Street friends are bailed out, states continue their irresponsible spending, politicians are re-elected.
The Fed-owning banks own a lof of municipal debt and stand to lose much money through state debt defaults.
Congress is not likely to bail out states directly.
The option remaining is for the Fed to buy worthless state debts, including pension debts, to save the banks' balance sheets.
The strategy is to build support for massive bond purchases by the Fed - something which will not require legislative approval.
Game, set, match. Irresponsible banks sell/dump dump their debts on the Fed which creates money out of thin air, therebyshifting the pain to unsuspecting holders of dollars around the world as that debt is "monetized," the world-wide dollar money supply is inflated, US interest rates are forced to increase, the savings of responsible individuals, banks and governments are devalued, Fed-owning banks and their Wall Street friends are bailed out, states continue their irresponsible spending, politicians are re-elected.
Seriously, what does anyone think Mr. Hu was in town for, sightseeing?
Correction: ... Banks sell/dump their (devalued) municipal/state BONDS to the Fed for book value, not market value ...
Could this be a ploy to have the Feds bail them out?
You know, we have to give Palin credit for at leadt the only potential candidate out there who had warned about possible states being bailout....I remember reading a Facebook post early last year about it and seeing a speech she gave when she was still governor
Meredith Whitney let the cat out of the bag and now everyone is hating on her...
Two More Investors Come Out And Slam Meredith Whitney’s “Outlandish And Outrageous” Predictions
“A few days ago we reported that Newt Gingrich was pushing for legislation to allow states to file for bankruptcy, “allowing Them To Renege On Pension And Benefit Obligations.” As we speculated back then “obviously what this means for equity investors in assorted muni investments is that a complete wipe out is becoming a possibility, as Meredith Whitney’s prediction, which everyone was quick to mock and ridicule, is about to come back with a vengeance.” Sure enough, this most recent development in the states’ path to insolvency was quickly ignored as it was not a dipping mushroom cloud that could be bought. Until tonight: the NYT has just rehashed the post in an article that would not only validate the Whitney thesis if true, but make a Cramer-Bove out of everyone who has been caught on tape in the past two weeks kicking and screaming that there is no chance in hell the carnage predicted by the scourge of Citigroup (and yes, back in 2007 everyone said that Citi could never fail either)”
Too late it’s begun!
“With increasing confusion over the cash muni bond market, very little has so far been said about the even more confusing muni CDS market. However, as municipal bankruptcies are likely about to take the country by storm, it is really the synthetic market that should be occupying investors’ attentions. This is especially true with yesterday’s disclosure that the bankrupt city of Vallejo is offering recoveries of only 5-20 cents to its sub creditors:”
In full http://www.zerohedge.com/article/muni-cds-market-primer
The Meredith Whitney Effect In One Big, Beautiful Chart
Read more: http://www.businessinsider.com/the-meredith-whitney-effect-2011-1#ixzz1BdtjNgMF
Bankruptcy implies, by it's ver nature, a government ABOVE the States facilitating it's disposition of revenues and liabilities.
No interference in this issue is the right and proper course for the US Government.
Let the States reap what they sow.
The Velocity of the Fed's printed arsenal continues to decelerate. The phantom inflation we see in commodities is a mirage, soon to be gone.
There are hundreds of securities and derivatives, if not thousands, that depend upon Munis/State Bonds for their primary value, or insurance against their "riskier" investments.
There will be no monies allocated out of this House of Representatives to bail anyone out.
Acquire and hold cash, in the bank and under your mattress.
Annex Chicago to DC and leave the rest of Illinois alone.
“You know, we have to give Palin credit for at leadt the only potential candidate out there who had warned about possible states being bailout....I remember reading a Facebook post early last year about it and seeing a speech she gave when she was still governor”
Palin not only deserves credit for that - as governor, she was much more responsible with Alaska’s finances. Alaska has one of the best state credit ratings in the U.S. I wish that was emphasized more in debates about her qualifications. Unlike other politicians, she didn’t squander taxpayer funds and recklessly run her budget into the ground.
How much money wou;d the states save by nullifying unfunded mandates?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.