[ken5050]

It will be bad, but not as bad as that..you're going to see munis reorganized into several classes, by risk..the lower tranches will be toxic.

The GOOD news is that Detroit, and other entities that won't back their bonds, will NOT be able to borrow, period, even at rates that would make a loan-shark blush. Detroit will have to operate on a cash basis balanced budget, and the cuts to achieve this will be brutal.

The most immediate casualties, IMHO, will the the insurance companies that have made a fortune "insuring" municipal bonds. Those "guarantees" will prove to be worthless..many of them will fail..

[publius911]

The GOOD news is that Detroit, and other entities that won't back their bonds, will NOT be able to borrow, period, even at rates that would make a loan-shark blush. Detroit will have to operate on a cash basis balanced budget, and the cuts to achieve this will be brutal.

A balanced budget!
What a concept!

Why hasn't anyone thought of this before?

< /sarc >

[Gabrial]

“The most immediate casualties, IMHO, will the the insurance companies that have made a fortune “insuring” municipal bonds.”

hmmmm...had not thought about that...glad I don't have any stock in insurance companies right now. I had been thinking more of the existing bondholders getting screwed.

Just out of curiosity, what is your take on the student loan bubble created by Obama’s land grab of the student loan industry?

[DuncanWaring]

The experience of Greece suggests that the bond-insurers will find a way to avoid paying that which they have contracted to pay.