Cities and Towns – The Next “Deadbeats”

Damn deadbeats should of known better…

WSJ – New Risks Emerge in Munis

By MICHAEL CORKERY

The housing crisis was fueled by cash-strapped homeowners who walked away from their mortgages. Some analysts and investors now are worried about the same problem happening with debts of cities and towns.

For more than a year, Menasha, Wis., hasn’t paid back about $23 million in principal for short-term notes tied to a failed steam plant, even though the deal’s offering documents include a statement that the city would use tax revenue to cover any debt payments, if needed.

But that statement “was no guarantee” to repay the debt, says Edward Fuhr, a lawyer for Menasha, a small industrial city that has spent an average of $80,000 a month to fight investor lawsuits in three courts over the notes, which matured in September 2009.

The tangle underscores concern in the municipal-debt world about the longstanding assumption that local governments will do whatever it takes to repay their debts—including raising taxes—because failing to do so would make it more expensive or even impossible to turn to investors for future financing.

Such cases are rare but could increase in number as municipal governments struggle to meet their obligations on projects that have run into trouble. The greatest default risk is in small municipalities with overleveraged projects buffeted by the recession. Those places also might need to access credit markets less in the future than big cities, making it easier to walk away from their debt.

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I sure could use some…

Comments
3 Responses to “Cities and Towns – The Next “Deadbeats””
  1. l vent says:

    Every TRANCH of Government can for sure accept their fair share of guilt in this huge PONZI SCHEME which created fake unsecured debt all over this country and the entire world. Only problem here is MAINSTREET WILL NO LONGER ACCEPT ANY MORE OF THE BLAME THAT IS BEING PUSHED ON ALL OF US. WE NOW KNOW WHO THESE PEOPLE ARE who have been trying to BLAME MAINSTREET for taking on to much debt but THE problem is THE DEBT NEVER EXISTED AND IS UNSECURE DEBT. THESE PEOPLE JUST LOOK ALL THE MORE RIDICULOUS NOW THAT THE REAL TRUTH IS KNOWN TO MAINSTREET. They are those in the MAINSTREAM MEDIA AND OUR ELECTED POLITICIANS. THEY HAVE EGG ALL OVER THEIR FACES AND HAVE TRIED TO TURN NEIGHBOR AGAINST NEIGHBOR IN THEIR BLAME GAME. WE WILL NOT FORGET WHO ALL OF YOU ARE. PLAYING STUPID JUST MAKES ALL OF YOU LOOK MORE ARROGANT.

  2. John Galt says:

    About time the Muni Bond market figured out what I did n February of 2008…..

    Municide

    This will be the wave that takes down the rest of the financial system thanks to the foreclosure fiasco and fraud by the financial institutions on such a massive scale.

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