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BY MICHAEL CORKERY
A consulting firm founded by economist Nouriel Roubini said there could be close to $100 billion of municipal-bond defaults over the next five years as state and local government-debt problems damp the U.S. economic recovery.
That figure would by most estimates represent a significant increase over defaults in recent history, but it doesn't appear to be as dire as a prediction last year by analyst Meredith Whitney.
The report, by David Nowakowski and Prajakta Bhide at Roubini Global Economics and released to clients Monday, says state and local debt problems aren't "systemic" in nature, nor will they "infect the financial system." The authors of the report declined to comment.
Most of the defaults will occur among special government projects and revenue-generating entities that aren't considered viable, it says. "Defaults will continue to be isolated events."
The Roubini report says that relying on the history of low default rates in the municipal debt market is "Pollyannaish."
"Avoiding a crisis will involve real austerity that has only partially been implemented thus far," the report states.
http://online.wsj.com/article/SB1000...066991472.html
A consulting firm founded by economist Nouriel Roubini said there could be close to $100 billion of municipal-bond defaults over the next five years as state and local government-debt problems damp the U.S. economic recovery.
That figure would by most estimates represent a significant increase over defaults in recent history, but it doesn't appear to be as dire as a prediction last year by analyst Meredith Whitney.
The report, by David Nowakowski and Prajakta Bhide at Roubini Global Economics and released to clients Monday, says state and local debt problems aren't "systemic" in nature, nor will they "infect the financial system." The authors of the report declined to comment.
Most of the defaults will occur among special government projects and revenue-generating entities that aren't considered viable, it says. "Defaults will continue to be isolated events."
The Roubini report says that relying on the history of low default rates in the municipal debt market is "Pollyannaish."
"Avoiding a crisis will involve real austerity that has only partially been implemented thus far," the report states.
http://online.wsj.com/article/SB1000...066991472.html
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