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alstry (< 20)

A Muni Bankruptcy BLOODBATH?????



February 10, 2010 – Comments (2)

Now MORE AND MORE in the mainstream press are using adjectives like Alstry....

Bankruptcy Bloodbath May Hit Muni Owners

Feb. 10 (Bloomberg) -- Public officials shouldn’t think about filing for Chapter 9 municipal bankruptcy to solve mounting labor costs and pension liabilities.

Even talking about this action will invite an inquiry from Fitch Ratings, the company said in a report published Jan. 27.

“The more bankruptcy is publicly discussed as an option for financial relief, the more its tarnish wears off, increasing the likelihood of its actual use,” Fitch said.

The biggest financial crisis since the Great Depression is squeezing municipalities across the country. Since Vallejo, California, successfully petitioned for bankruptcy protection in May 2008, California’s towns, Detroit’s schools and Pennsylvania’s capital city of Harrisburg have all talked about Chapter 9.

That should make bondholders nervous because it “questions whether a local government’s labor contracts would be surgically undone with bondholders’ rights left intact,” Fitch said.

Or as John H. Knox, a partner with Orrick, Herrington & Sutcliffe in San Francisco, which is counsel to Vallejo in its bankruptcy, said in an interview: “Any plan is going to impair all classes of creditors, including bondholders.”

We are getting closer and closer to the REAL RECOVERY!!!!!!!

2 Comments – Post Your Own

#1) On February 11, 2010 at 2:20 PM, miteycasey (28.85) wrote:

Sweet...I hope this causes them to reign in their spending.

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#2) On February 16, 2010 at 11:52 PM, bigcat1969 (81.12) wrote:

I never knew Alstry was an adjective!

Actually I believe we are running away from a real recovery at full speed.  China is starting to step back from purchasing our debt which might give the other BRICs pause , Europe is in no condition to buy our debt and the Middle East is always a powder keg.  Eventually government pumping of the economy is just running in place at a terrible price which will come when debt can't be sold.  Ever maxed out a credit card?  Then the only option is print and start a good war.  The good news is that as we add liquidity, the stock market will go higher which might lead to a 50k DOW and hundred buck a loaf bread, though not for quite a while yet.

For now the Euro gives us a bit of a break since it has its own problems that make the dollar look better and Japan can afford to buy our bonds in exchange for our military providing free security for them.

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