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Illinois’ financial outlook was changed from ‘stable’ to ‘negative’ by two major ratings firms, raising the risk the state’s credit rating will formally fall to non-investment grade status.. ... the state is actually paying higher interest on its debt today than it was in June 2017, according to Crain’s Chicago Business. When investors demand higher interest it generally reflects a higher risk that borrowers will default. Illinois was the least prepared to weather a recession heading into the coronavirus crisis, with only about 15 minutes of state spending saved in a rainy day fund. Lower credit ratings mean investors will...

Kicking pension problems into the future is popular with politicians, enabling them to make promises and let voters worry later about borrowing costs. But large, unfunded state pension liabilities are a costly problem—and the cost is already reflected in current bond prices, research by Chicago Booth PhD candidate Chuck Boyer suggests. “The public pension funding crisis is not merely about future insolvency,” he writes. “Future obligations are having an effect on debt spreads right now.” To many Americans, it may seem unimaginable that states would fail to fully pay pensions promised to teachers, firefighters, and other public-service workers. It has...

New York Senator Charles Schumer was instrumental in getting Bharara appointed to that position and in return was asked from time to time to do favors for the senator and his allies. Up until recently, President Trump had no idea what was really going on. Once President Trump’s staff understood the quid pro quo, they had no choice but to ask for Bharara’s resignation. In 2015, Puerto Rico defaulted on $70 billion in municipal bonds. Those involved panicked. There was ample evidence that the issuing agencies were technically bankrupt when they issued the bonds and that they purchased fraudulent credit...

Jim Bryan III, 75, of Longboat Key, FL, died Sep. 1, 2015 at Arkansas Hospice from complications of pancreatic cancer. He was born in Harrison, AR in 1940 to the late J.W. and Jane Bryan of Bellefonte, AR. He was preceded in death by his son Joey (who died of a brain tumor in 1981 at age ten) and grandparents Witt and Zula Burns Bryan and Noah and Myrtle Eoff Dearing. He is survived by his beloved wife of 52 years, Ann, son Jim, IV and his wife Ann, son Chris and his wife Jennifer, grandchildren Laura and her newlywed...

Ratings company Moody's on Tuesday slashed Puerto Rico's debt rating by three notches into even deeper junk status after the US territory passed a debt-restructuring law. Moody's Investors Service cut the rating to "B2" from "Ba2" and said the outlook was negative, indicating further downgrades were possible. Now dubbed the "Greece of the Caribbean," the archipelago is, like Greece, reeling under massive debt. Over the past decade, the commonwealth's debt has doubled to nearly $70 billion and investors are growing increasingly worried the government is running out of cash. In a bid for debt relief, the Puerto Rican authorities recently...

The Securities and Exchange Commission accused Miami and its former budget director of securities fraud related to several municipal bond offerings. The city and Michael Boudreaux made materially false and misleading statements and omissions about interfund transfers in three 2009 bond offerings totaling $153.5 million, the SEC said in a statement Friday. Boudreaux orchestrated the transfers to mask growing deficits in the city’s general fund, the SEC said. The SEC in 2010 started cracking down on state and local governments for not providing investors in the municipal bond market with accurate information about pension liabilities. Since then, Illinois and New...

A decision by Warren Buffett's Berkshire Hathaway Inc. BRKB -0.15% to end a large wager on the municipal-bond market is deepening questions from some investors about the risks of buying debt issued by cities, states and other public entities. The Omaha, Neb., company recently terminated credit-default swaps insuring $8.25 billion of municipal debt. The termination, disclosed in a quarterly filing with regulators this month, ended five years early a bullish bet that Mr. Buffett made before the financial crisis that more than a dozen U.S. states would keep paying their bills on time, according to a person familiar with the...

Half a million Californians now live in bankrupt cities, as San Bernardino joins Stockton in declaring insolvency thanks to a $46 million deficit (a smaller city also declared bankruptcy this month). Lest anyone think this was a result solely of the 2008 housing bubble and financial crisis, Reuters reports that: the city attorney general James Penman said San Bernardino’s city officials had been submitting false accounting documents for 13 of the last 16 years in an effort to hide the real financial situation of the city. San Bernardino’s mayor since 2006, Patrick Morris, said he had never heard of allegations...

U.S. states and localities have more than $2 trillion of unfunded pension liabilities, Moody's Investors Service said on Monday, citing data on plans offered by 8,500 local governments and over 14,000 individual entities. The total liabilities for fiscal 2010 were more than three times the amount reported by local governments. "Pension liabilities are widely acknowledged to be understated," Moody's Managing Director Timothy Blake said. Most state fiscal years end on June 30. The rising cost of public pensions has strained finances for cities around the country. Stockton, California, which last week became the biggest U.S. city to file for Chapter...

We're already in May, and so suddenly people are wondering: Where are all the muni market disasters we're supposed to be getting this year? Why has it been so quiet. Why haven't munis fallen, like Meredith Whitney said they would? Fear not: she hasn't given up. Speaking today at the Milken Conference in LA, she doubled down on her call for hundreds of billions of dollars worth of defaults saying, according to Bloomberg: "This municipal issue, you can criticize me for anything you want, I’m numb to it, because I have more conviction on this than I’ve had on any...

"Fundamentals are horrifying: unfunded pension liability [is] growing from $7 trillion this year to $11 trillion next year to $15 trillion in two years. Health care costs going up at 9 percent a year, inability to raise taxes ... headline risk is predominant," Albrycht said. "You need to have aggressive reform, like we are seeing in New Jersey. You need to have governments dealing with the situation, like we're seeing in Wisconsin and Illinois," he added. If over the next 24 months there is not pension reform, the munis are in trouble, Albrycht went on to say. "13 states right...

It has been a few weeks since the last attempt to extend the Build America Bonds program, even as muni bond prices continue to stagnate. Which means it is time for another valiant try, this time possibly using the post-revolutionary chaos in Egypt as a smoke screen. Bond Buyer reports that Rep. Gerald Connolly, D-Va., has introduced a bill extending the Build America Bond program through 2012 at subsidy rates of 32% in 2011 and 31% in 2012. Since we are certain that Bill Gross is lobbying about as hard as one can to get this bill passed due to...

High-profile Wall Street analyst Meredith Whitney's doomsday prediction that hundreds of billions of dollars in municipal bonds will evaporate in default over the next year has been condemned as improbable to irresponsible by just about anyone who knows anything about municipal finance. Cities and states rarely default on their debt, and for her prediction to be accurate, the economy would have to be getting much worse rather than somewhat better, as most data show. It's hard to imagine even places like California, New York and New Jersey somehow deciding not to pay back bondholders this year; governors in each state...

But, but, munis always pay back almost 100 cents on the dollar, even in bankruptcy, right? Wrong. Bankrupt Vallejo just filed a POR to pay back unsecured creditors between 5 and 20 cents. "The city regrets that it cannot pay a higher percentage,” Vallejo officials said in the court filings. “The city lacks the revenues to do so while maintaining an adequate level of municipal services, such as the provision of fire and police protection and the repairing of the city’s streets." Just wait for the reaction when holders of unsecured debt all those other (hundreds of) insolvent cities, towns,...

We often disparage the Wall Street Journal for being too spineless to tell it like it is when reporting on the state of the economy, but with last Friday’s lead story, New Hit to Strapped States, they pulled no punches. You can almost pick a paragraph at random and get a sense of how serious the cities’ credit problems are. This paragraph, for instance “Municipalities borrowed $122 billion of variable rate demand debt in 2008, roughly twice the amount of these types of loans borrowed the year before…” How did they get in so deep? The answer lies in the...

Recent headlines trumpeting staggering budget deficits in states and cities throughout the nation have stricken fear into the hearts of municipal bond investors. California's deficit has grown to an astounding $25 billion, while Illinois is grappling with a projected deficit that could swell to $15 billion. In September 2010, Pennsylvania's capital, Harrisburg, announced its intention to default on $3.3 million in bond obligations, before their bond insurer stepped in to bail them out. Crunch the numbers and it's not hard to see why investors are feeling nervous about how municipal bond issuers are going to make good on their obligations...

The municipal-bond market is in crisis, with prices fall ing and investors running for cover -- and for good reason. Munis -- bonds sold by states, cities, counties and other localities to finance government operations -- are in trouble because the Ponzi scheme of Big Government is coming unglued. The markets are merely reflecting this reality, as they always do. The $3 trillion muni market was once regarded as the safest of all investments because the bonds are backed by government taxes. Now it's showing all the earmarks of the 2007-08 meltdown. That mess began with investors fleeing from bonds...

Meredith Whitney is not crying wolf. The analyst famed for correctly calling the implosion of banks and the ensuing credit crisis has been warning about defaults in the $2.9 trillion municipal bond market. She isn’t the only one. Jamie Dimon, Chief Executive of J.P. Morgan Chase recently commented that there are significant problems facing munis and technical defaults have already happened. He ought to know. Big banks like his backstop billions of dollars of muni obligations with letters of credit that they may not want to renew. The immediate, under-the-radar problem for the municipal bond market is that borrowers relied...

Meredith Whitney is on Squawk Box this morning, and we're 100% sure she'll be talking about the muni det fiasco she sees in 2011. We'll be covering key highlights live. * The conversation starts with JPMorgan and the dividend discussion. Rather than paying out cash, she favors JPMorgan acquiring in Asia, in particular standard chartered. This is the time to make major strategic acquisitions. * On the housing mess and where we are in the process? "Who knows?" Certainly the robosign issue has been put to bed. * Now she's talking the big topic: munis... "We've never said that any...

Meredith Whitney continues to get thumped by everyone under the sun for predicting on 60 Minutes that 50-100 American cities will go bust next year, triggering the next leg down in the financial crisis. Whitney's competitors, for example, are outraged (in part, no doubt, because she was on 60 Minutes, not them). Journalists and research firms are scrambling to refute her. Towns and cities are furious. Muni bond holders want blood. And so on. Which means that Meredith Whitney has done it again. Great Wall Street analysts make big, bold calls that make people think. And, right now, Meredith Whitney...