Do I feel foolish. ;)
Merry Christmas everyone. May this night of nights bring joy and peace to all of you.
Posted on 12/24/2010 7:58:03 AM PST by TigerLikesRooster
Just How Freaked Out Should You Be About A ‘Muni Meltdown’?
Published: Thursday, 23 Dec 2010 | 11:31 AM ET
By: Jason Farkas
America is now officially worried about a municipal bond meltdown. In a piece called "Day of Reckoning," CBS 60 Minutes showcased financial analyst Meredith Whitney’s bold prediction that we will see “50 to 100 sizable [muni] defaults...more. This will amount to hundreds of billions of dollars of defaults.” It’s a frightening forecast.
Another sign that the muni issue has captured America’s attention: the number of people searching for the term ‘municipal bond’ on Google has spiked in the last week.
Even Goldman Sachs [GS 167.60 -2.00 (-1.18%) ] and Citigroup [C 4.68 -0.05 (-1.06%) ] analysts rushed out notes in the days following the broadcast, assessing the likelihood of Whitney’s doomsday scenario.
“The public debate on the subject of municipal credit is terrific and Whitney has helped to energize it even more,” says Ben Thompson, who oversees $7 billion in tax-exempt debt for Samson Capital.
Not one to ignore the structural problems in the municipal market, Ben was early to alert CNBC's "Strategy Session" to these issues back in June. But he’s quick to question the scope of Whitney’s call: “I disagree with the conclusion that the market is facing imminent defaults of the magnitude she described.”
So should you be freaked out?
(Excerpt) Read more at cnbc.com ...
Very interesting. You know your bonds. The bond explosion of the last 30 years has enabled all these counties, municipalities and other governmental entities (such as this hospital districts) to borrow much more than they should have.
This explosion in bonding was facilitated by Wall Street bond underwriters. They promoted the explosion in borrowing and bribed the Gov’t officials who chose their firm
Irresponsible and unsustainable municipal hiring and compensation packages are destroying the finances of the municipalities. In effect, they are damaging their own retirements savings
To complete the circle of disaster, the very same government employees who are destroying the finances of the municipalities, which will lead to bond defaults, have much of their pensions tied up in munis
Do I feel foolish. ;)
Merry Christmas everyone. May this night of nights bring joy and peace to all of you.
“Safe” insurers like these two - they screwed the taxpayers big-time:
1. AIG
2. Pension Benefit Guaranty Corporation (PBGC)
“”A large of portion of peoples pension and retirement funds are invested in munis””
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There is no basis for a pension plan to own municipal bonds. A pension plan does not need tax free income nor does an IRA need tax free income as the IRS taxes the pension plan or IRA distributions as taxable income.
You can never say “the government”. We have the Feds, we have states and counties. We have cities. We have semi-governmental authorities and hospital districts that tax us and collect tolls with counties and states being on the hook for them
What you say is true for the most part. We have thousands of distinct governmental entities in America so policies vary widely as to how their workers pensions are funded. For example if CALPERS screws up mightily it has recourse and can go to California counties and cities and demand they make up for the shortfall. Many government workers are protected like this. Say the Munis in their pension’s portfolio take a dive....The pension fund can extract money from the taxpayer to make up for this. Some government workers have no such pension protection
The Feds will just print more money for their retired workers
But they also have written into their contracts that if the pension funds come up short, the taxing ability of the state must make it whole. And the courts back 'em up. Virtually all civil servant pension fund management is a state function.
Municipal bankruptcy does not negate pension liabilities.
yitbos
Bookmarked for future readings.
The left is worried about it they are freaking out over the loss of Build America Bonds which was their way of already partially bailing out these failing entities.
The Politics of the Blue State Bankruptcy
http://dollarcollapse.com/uncategorized/the-politics-of-the-blue-state-bankruptcy/
Personally I wouldn’t trust Bonds look at MBS’s people thought they were buying Triple AAA products turned out the ratings were a complete lie and they were filled with toxic loans so obviously you can’t trust the rating agency. Now Insurer’s are suing and although they won a recent victory BOA intends to fight them tooth and nail it will drag on for years.
Bank of America Loses Bid to Stop MBIA Using Statistics in Fraud Lawsuit
snippet..
“At Least 12 Claims
MBIA’s suit against Bank of America and its Countrywide unit is one of at least 12 claims brought by insurers in state and federal courts targeting issuers of mortgage-backed securities, including Deutsche Bank AG, Credit Suisse and GMAC Mortgage LLC. Government-owned mortgage companies Fannie Mae and Freddie Mac, and bond investors such as MetLife Inc., are also pursuing repurchase demands from originators of the securities.”
“MBIA paid $2.2 billion in guarantees on the disputed securities and may have to pay “hundreds of millions of dollars more” to reimburse investors who were to receive money from mortgages that went into default, according to court documents.
“Quality of Loans
MBIA said its reviews found that 91 percent of defaulted or delinquent loans had “material discrepancies from underwriting guidelines,” such as borrower incomes, credit scores or debt- to-income ratios. The 15 securities pools in the lawsuit consist of 368,000 home-equity lines of credit and second-lien loans that were insured and sold to investors from 2004 to 2007.”
Yes lol they kept reassuring people everything was just fine and then boom it wasn’t.
Conflict of interest in the ratings of MBS’s fraud in the Muni’s you can’t trust the ratings agency’s or the banks...
Bank of America Muni Bid Rigging Payments May Be `Tip of the Iceberg’
Ex-Bank of America Muni Broker Enters Guilty Plea in Fraud Case
Credit-rating agencies at fault, senator says
“Sen. Richard C. Shelby of Alabama, the senior Republican on the Banking, Housing and Urban Affairs Committee, said hearings likely this fall may look into possible conflicts of interest, since the agencies are paid by the same banks whose debts they rate for resale.”
http://www.washingtontimes.com/news/2007/aug/21/credit-rating-agencies-at-fault-senator-says/
Ex-Bank of America Muni Broker Enters Guilty Plea in Fraud Case
http://www.businessweek.com/news/2010-09-10/ex-bank-of-america-muni-broker-enters-guilty-plea-in-fraud-case.html
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Very interesting. Another reason to hate thieving banksters. But the municipalities and other governmental entities issuing muni-bonds. They were/are borrowing far too much to keep all kinds of unneeded construction projects going so that hack politicians could get kickbacks, campaign donations and bribes from construction companies. In my county the taxpayers are on the hook for one billion dollars worth of unneeded school construction
The two biggest enemies of America are banksters/wall street and Democrat politicians who are are elected or in the vast bureaucracies staffed by these Democrat idiots and incompetent affirmative action queens. Plus gays adore working for the Federal government for the bulletproof medical coverage for them and their “domestic partner”
Sociology = education/brain washing discipline invented by socialists as the training ground for bureaucrats.
yitbos
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