Bondholders have cut the line

By Cate Long
August 3, 2011

Something doesn’t seem right in Central Falls, the Rhode Island city that declared municipal bankruptcy yesterday. Now that the state receiver has filed Chapter 9, all the town’s dirty laundry has been hung out in public, and, like any bankruptcy, it’s not pretty. Overspending and declining tax revenues doomed this poor town, along with liberal doses of alleged corruption.

The smallest city in the smallest state

By Cate Long
August 1, 2011

Central Falls, Rhode Island — the smallest city in the smallest state — filed for bankruptcy today after years of decline. It is the fifth U.S. municipality this year to seek protection from the courts under the bankruptcy law. The Governor of Rhode Island stood with city officials as the bankruptcy process commenced. Reuters quoted him as saying in a statement:

Supporting less prosperous brethren

By Cate Long
July 29, 2011

There are many financial linkages between various levels of government in muniland but everyone eventually has to stand on their own. It’s like the cousin you grew up with but don’t see much now other than holidays. When your cousin loses their job and their mortgage is being foreclosed you want to help but in a limited way. You want the cousin to get a job and cut a deal on their mortgage or do a short sale. You don’t want them moving into your home or having access to your bank account. It’s the same between the federal, state and local governments. They are cousins. But not that close.

The middle sadness

By Cate Long
July 29, 2011

The middle sadness

Paul Mason, the economics editor of the BBC’s Newsnight program, recently retraced John Steinbeck’s footsteps during America’s Great Depression.  What he found was a broad swath of sadness as he observed many citizens who have lost jobs and homes. It’s the invisible America. From the BBC:

Geeks for democracy

By Cate Long
July 28, 2011

Geeks for democracy

“How do you enable people to have a louder voice within their communities?” asks Conor White-Sullivan. He answered his own question by developing Localocracy, a platform that hosts community-focused discussion boards seeking participants who are registered to vote and who use their real names. Localocracy gives citizens an opportunity to generate discussions to influence each other, their government and journalists.

The state becomes the guarantor

By Cate Long
July 27, 2011

Jefferson County, Alabama is getting a lot of attention as it negotiates with the holders of $3 billion of sewer bonds. The county would like to pay $2 billion to settle the $3 billion of bonds outstanding and limit the rate increases county residents would have to pay. This arrangement would pay bondholders (led by JP Morgan) 66 cents on the dollar — not a great recovery but not outrageous either. Bondholders want the state to guarantee this new arrangement and stand ready to pay in the event of another default.

What would a debt-limit crisis cost the states?

By Cate Long
July 27, 2011

Thanks to Jordan Eizenga at the Center for American Progress, you can see some scenarios of the impact of the halt in payments to states if the debt ceiling is not raised. Jordan says:

Markets hold the whip, but are they rational?

By Cate Long
July 27, 2011

There has been a lot of discussion over the past few days about whether the United States deserves a triple-A rating. The weak and meandering attempts of the Congressional leadership and President Obama to reach a consensus on raising the debt ceiling has prompted this storm of confusion. The political theater is painful.

Oh Illinois!

By Cate Long
July 25, 2011

 

Oh Illinois!

Illinois has massive problems: the state has more liabilities than assets, and the credit-default swap market says they are the number one state at risk for default (see chart above). The Bond Buyer ran an excellent story on how the liabilities of Illinois are rapidly increasing:

Most expensive sewage system in history

By Cate Long
July 21, 2011

If you say “Jefferson County” to a professional in muniland, you will likely get a shudder of mild revulsion. This Alabama county is the biggest example of Wall Street aggression towards a public entity since Orange County, California declared bankruptcy in 1994 after buying too many interest-rate derivatives. Dodd-Frank, the financial-reform law that’s been in effect for a year, changed the rules for municipal bonds and derivatives.  But did it change them enough to avert a repeat scenario?