Path Sought For States To Escape Debt Burdens.

Last evening at the Tea Party Group meeting, a discussion came up about the possibility of States declaring Bankruptcy, wiping out Pension Funds and Municipal Bond Debts. This morning Bob Beauprez e-mailed me this timely article from the New York Times. If we think we have seen the worst of the financial scenarios, watch out.

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Path Is Sought for States to Escape Debt Burdens
By MARY WILLIAMS WALSH
Published: January 20, 2011

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.

Read More: http://www.nytimes.com/2011/01/21/business/economy/21bankruptcy.html?pagewanted=1&_r=3&hp

Yes... I did read more... Here is the part you left out:

Senator John Cornyn, a Texas Republican, has asked the Federal Reserve chairman, Ben Bernanke, about the possibility of drawing up a bill allowing states to go bankrupt.

No state is known to want to declare bankruptcy, and some question the wisdom of offering them the ability to do so now, given the jitters in the normally staid municipal bond market. Many analysts say they consider a bond default by any state extremely unlikely, but they also say that when politicians take an interest in the bond market, surprises are apt to follow.

Mr. Maco said the mere introduction of a state bankruptcy bill could lead to “some kind of market penalty,” even if it never passed. That “penalty” might be higher borrowing costs for a state and downward pressure on the value of its bonds. Individual bondholders would not realize any losses unless they sold. "

Gee, leave it to a Rightie to look for a way to screw the folks who have paid into a retirement plan, and walk away from the obligations, and walk away from General Obligation Bonds. Yessiree... "Compassionate Conservatism" at its finest... I thought you guys were all in favor of protecting bondholders, and keeping state budgets down? "Higher borrowing costs for a state and downward pressure on the value of its bonds" doesn't sound like a very good way to keep a state from wasting money when it has to sell bonds...?

LJ:

You are free to take from this article or any other article, whatever you feel is relevant to you. You can heed warning signs, or not, that too is up to you.

For some reason, anything and everything I post, is cause for you to look at it with you one form of skepticism or sarcasm.
C'est La Vie!

gee, leave it to a lefty to screw this nation by spending this country into oblivion. If the well is dry, you can't get water. There is no more money, its gone, kaput, nada, what don't you understand about this?..You think that obama's money will be worth anything in a year's time. NOPE!

LadyJazzer wrote: Mr. Maco said the mere introduction of a state bankruptcy bill could lead to “some kind of market penalty,” even if it never passed. That “penalty” might be higher borrowing costs for a state and downward pressure on the value of its bonds. Individual bondholders would not realize any losses unless they sold. "

Gee, leave it to a Rightie to look for a way to screw the folks who have paid into a retirement plan, and walk away from the obligations, and walk away from General Obligation Bonds. ...?[/quote]



A market penalty is economics, not one imposed by evil righties. Would you care to guess which party runs Vallejo, Ca?

"
SAN FRANCISCO — Unsecured creditors will receive 5 cents to 20 cents on the dollar for their claims under a reorganization plan Vallejo, Calif., filed Tuesday in federal court.

The plan to exit bankruptcy outlines the reorganization of debt the city owes its largest creditors, Union Bank and National Public Finance Guarantee. It also sets aside a pool of $6 million to pay unsecured creditors about 5% to 20% of their claims over two years, according to court documents filed in U.S. Bankruptcy Court for the Eastern District in Sacramento."

http://www.bondbuyer.com/news/vallejo_c ... day_011911