Posted on 07/24/2013 10:26:53 AM PDT by publius911
The first officially recorded municipal bond was issued by the City of New York for a canal in 1812. It was a general obligation bond, meaning the city pledged every available resource – most notably, tax revenue – to repay the debt. So, in theory, unless the city lost its legal ability to levy taxes, which it never would, investors would be repaid...
If Orr succeeds, look for all hell to break loose. Just like we witnessed during the real estate collapse when homeowners started walking away from their mortgage obligations without any recourse, other cash-strapped municipalities are destined to follow Detroit’s lead and try to renege, too.
(Excerpt) Read more at wallstreetdaily.com ...
“401(k)s and IRAs? Forget it.”
Can you say in terms of what? Will this be the ‘crisis’ that will enabe the Treasury to confiscate everyone’s retirement $$, or do you mean we can kiss 80% of the value good-bye?
Or both?
The GOOD news is that Detroit, and other entities that won't back their bonds, will NOT be able to borrow, period, even at rates that would make a loan-shark blush. Detroit will have to operate on a cash basis balanced budget, and the cuts to achieve this will be brutal.
The most immediate casualties, IMHO, will the the insurance companies that have made a fortune "insuring" municipal bonds. Those "guarantees" will prove to be worthless..many of them will fail..
The complete article at the link explains the problem in detail; Many retirement accounts are heavily into Bonds, traditionally the safest investment.
If Detroit succeeds in defaulting on all its bonds, they wont be worth squat. Both present and future.
Nationwide.
It is all part of his twisted “spread the wealth around” plan.
He did the identical thing with GM. He screwed the bondholders with cents on the dollar. Many good hardworking people had their savings in GM bonds and they were screwed.
The same thing will happen here.
I would be very careful with municipal bonds right now. It could be SHTF time for these once solid investments as the liberal cities start to fall one by one.
A balanced budget!
What a concept!
Why hasn't anyone thought of this before?
< /sarc >
Looks like Wall Street is beating the drums of national collapse unless gov bails the cities (bondholders) out with taxpayers money again??!!!!! If anyone has been buying Detroit bonds they deserve to face default.
Thanks for responding. I unfortunately could not access the link as I am not on my usual pc (just so you don’t get the impression I was simply being lazy)
A little rational thought will focus the discussion on reality.
The bonds can not be repaid if there is no revenue.
If there is to be a new city, all traces of the old must be eliminated. The new must be new. That which is old....cops, teachers, bureaucrats, water depertmants etc must be scrapped. A governor’s viceroy must be appointed to replace all the junk, both people and institutions.
what do I care anyway.....hubby and I have worked our whole lives to arrive at a point where retirement won't be easy, where every dollar we have is targeted by the govt, where every other penny will have to go to pay for health care....
sell the house the buy a small motor home and just travel, fish, enjoy...
Yeah, and nobody batted an eye, either. If Forbes, CNBC, Bloomberg, the WSJ, et. al., make a real stink back then, maybe they'd think twice before doing this.
hmmmm...had not thought about that...glad I don't have any stock in insurance companies right now. I had been thinking more of the existing bondholders getting screwed.
Just out of curiosity, what is your take on the student loan bubble created by Obama’s land grab of the student loan industry?
Careful what you wish for...
Watch for "Obamabonds" similar to Savings Bonds backed by the "Full faith and Credit of the United States" and bought through Uncle Sugar and they are the gate keeper for Detwaa, Baltimore etc rather than a Brokerage House and a Ratings Agency. Rather than buy Muni's themselves, ( yes many in these communities with modest savings could buy a nominal amount ) they will do so because Dear-Leader says so, and they will make it easy, imagine buying these mini-munis through your Union....
Imagine if they can get a cash stream again without having to worry about their "rating" and the Accounting Equation and those pesty things called Liabilities...
Detroit is just the biggest and the most visible. Add corruption, featherbedding and crony-ism and it is just the usual irresponsible ignorant no-brain people getting elected --- on steroids.
From California to Maine, deficit spending and the ease of borrowing coupled with ignoramuses who stay around three, five, ten terms and then retire to some warm pleasant place and let some other suckers take the heat when TSHTF.
Most visible and obvious about this mess is that most people just haven't a clue that 30-year bonds ACCUMULATE.
When the retarded, elected idiots are also corrupt, this is the only possible outcome.
I hope I never again hear that most stupid of spurious arguments, It's only a temporary half-cent tax!
That I haven't mentioned the "public service" unions is not an accident. They are the major component of this mess, but by no means the only one. I just don't want to get started on that.
The experience of Greece suggests that the bond-insurers will find a way to avoid paying that which they have contracted to pay.
If cities have a taxable base and assets it must convince a Fed judge that it absolutely cannot honor its bond obligations. It is not that easy to walk away. Bondholders and underwriters are suppose to analyze the cities accurately before they underwrite and/or buy the bonds. Meredith Whitney actually broached this subject several years back about how muni bond firms to not accurate audit and determine the ratings of cities and cities were committing fraud by budget shell games and misreporting data. Lack of monitoring and business as usual by the muni bond firms, and selling worthless high risk bonds as AAA paper game is afoot again. People who buy Detroit bonds, what are they thinking???!!!! A lot of powerful muni bond firms on Wall Street don’t want this issue expose that many of the “AAA” bonds they have been peddling have not been audited for many years and sold to investors, pensions and etc. Today there are too many broke local, county and state govs.
What are you smoking?
Good luck with that.
...Maybe that's the reason the feds have cornered the ammunition market??
Please don't give these whack jobs any ideas....
I was in New York a while back and an investment banker was giving me some statistic that something like 45% of all employed Americans are now living paycheck to paycheck with 0 savings.
I may not be remembering that stat properly, but I remember it scared the crap out of me.
Best news I've heard all year!
Imagine all the "public service" unions bankrupted in one fell swoop!
Ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha !
“A state appeals court on Tuesday (7/23/13) put on hold Judge Rosemarie Aquilina’s legal challenge to Detroit's bankruptcy, clearing the way for a federal judge to begin reviewing the city's filing.”
That sound you here are the bulkheads collapsing...she's goinjg down.
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