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FBN’s Gerri Willis on the mounting debt of cities across the country and their impact on municipal bonds.
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Whitney was threatening a major industry in this country the typically goes under the radar the municipal bond industry a massive.
Three point seven trillion dollar industry.
It relies on the confidence of investors and Whitney was threatening yet but this week she looks like she was -- -- -- thing.
-- just the last two weeks three California cities have declared bankruptcy.
The big shocker was -- in the largest city in the country ever to file.
And thanks to the birth housing -- bubble burst and rising public pension costs they were 417 million dollars in the red.
Mammoth lakes decided to throw in the towel after -- canceled real estate deal left them with a 43 million dollar bill.
Which is two and a half times the size of very annual budget.
And then on Tuesday San Bernardino realized it was short nearly 46 million and file bankruptcy.
On California.
Now true this is not the fifty to 100 cities Whitney predicted.
But she couldn't perceive the elaborate -- -- -- an outright lies these governments would used to stay out of bankruptcy.
Many go crying to their state house for help.
Pennsylvania operates a distressed cities program to stop them filing bankruptcy.
And 27 cities -- that Stater and -- And the -- used to resurrect them.
Option off all of future earnings of public parking garage is for the next thirty years that's according to Steve -- at the Manhattan institute.
Surely those revenues were already earmarked for something else -- lobby in municipal finance just moved their money around.
Look at -- York which one allow its cities go bankrupt either -- -- all many steps in an overseas failing governments.
That's why -- south county has been in fiscal receivership not once but twice.
-- the city of Detroit it's bust everybody knows that that the state has stepped in to help.
Michigan actually has the power to appoint emergency managers who can go into a -- Citi.
Fire their employees sell -- assets and change their budget without city approval.
He get the picture OK so these cities are technically in bankruptcy court but only because of the -- lying -- the government sleight of hand.
And it's and to not just cities that are in trouble analysis by the Illinois auditor general -- five states are broke take a look at these numbers.
Massachusetts nearly 23 billion dollars in the red.
Connecticut fourteen billion New Jersey over 33.
Look at -- California's -- and a half billion I would look so small.
And making -- broke sixth right it's Illinois.
Owing nearly 44 billion dollars more than I have itself was Meredith Whitney wrong as -- Wall Street critics have loved to point out.
I think she was on the right track she identified a problem we need to stare square in the face and solve rather than run away --
