Municipal Bankruptcies the New Norm143 views 2012-10-16 22:49
In the article “Beware
Municipal Bond Buyers; This Situation Isn’t Getting Any Better,” Lombardi
reports that cities in California, like Vallejo, Mammoth Lakes, Stockton, and
San Bernardino, have already defaulted on their municipal bonds, and he
believes that Compton is most likely to be the next to default.
“What do all these towns have in common? They are
suffocating under big budget deficits,” says Lombardi.
Lombardi notes that the cities that have already defaulted
on their municipal bonds are still scrambling. Stockton, California,
he notes, wants its municipal bond insurers to take a bigger hit because it has
pensions to pay—$26.0 million each year.
“The insurer of the municipal bonds stands to lose more than
$100 million,” says Lombardi.
In sum, the number of municipal bankruptcies is going to increase and the municipal bond investor will certainly be affected by it, concludes Lombardi.
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