Moody's warns state and local governments could see credit downgrades

politico.com ^ | Aug 10 2011 | politico.com

[NoLibZone]

Some state and local governments that issue debt could face “significant stress” if market instability continues and see credit downgrades, Moody’s warned Wednesday.

Although most municipal issuers are “well insulated from shock,” Moody’s said there are some governments that could be weakened in a volatile market environment.

However, the agency does not anticipate widespread defaults, but opened the door to possible downgrades, although not by more than one level, Reuters reported.

“We expect that the vast majority of these issuers could successfully manage through a period of diminished market access and tight liquidity without facing a severe deterioration in their credit,” Moody’s said in a statement.

Moody’s managing director Timothy Blake said “most municipal issuers are somewhat weaker than they were prior to the last major market disruption” and that is why “some may face significant stress if hostile market conditions emerge.”

Factors that could lead to market volatility include “global developments of a political nature,” unexpected default or problems on the local level, Moody’s said. And states and cities that issue debt to help with cash flow or their budgets are at greater risk, the agency added.

Moody’s announcement follows Standard & Poor’s Monday report that state and local governments with AAA ratings will not necessarily suffer from the United States’s downgrade.

“Pursuant to our criteria, the fiscal autonomy, political independence and generally strong credit cultures of U.S. states and local governments can support ratings above that of the U.S. sovereign,” S&P stated.

[NoLibZone]

If only we would give Carte blanche to the DNC, they could buy votes at will and keep the ratings.

[GonzoGOP]

Anyone who would lend money to Illinois or California should have their sanity questioned. There is no way they can pay their debts and they aren’t even trying.