Municipal Bonds in the news Again

by Laura Ehrenberg-Chesler on June 9, 2011

in Bonds,Fiscal Policy,Fixed Income

Municipal bond analyst Meredith Whitney is making the news again with the reiteration of her warning about  problems brewing in the municipal bond market.  She believes there could be “50 to 100 sizable municipal bond defaults amounting to hundreds of billions of dollars”.

While we would certainly agree that many states and municipalities are struggling, we are not sure we would be as alarmist as Meredith is.   Unlike the Federal government, several states have already recognized the need to cut spending, and improve their employment rates by becoming more business friendly in order to encourage businesses to relocate to their states.  They have actually taken action to begin the process of becoming more fiscally responsible. 

If more states and municipalities recognize their situation, and act, there may be a good chance to avert the kind of dramatic defaults that Meredith is predicting.

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