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Auction Debt Succumbs to Bid-Rig Taint as Citi Flees
http://www.bloomberg.com/apps/news?p...efer=worldwide
I'm surprised no one has discussed this yet. To me, this seems like a very, very big deal, and marks the day when the credit deflation started to affect the day-to-day operations of government.
Summation of the rest of the article: California has turned from bond auction rates to traditional debt, Wisconsin's bonds yielded 11.5%, a hospital in NJ paying 12%. This on top of (and maybe likely a cause of) Vallejo, CA's announcement of insolvency and likely bankruptcy.
Uh Oh
The Vallejo situation amounts to a run on the bank, and police and fire officers retired en masse, worried that they might not get their retirement payouts. One wonders how many other places this will be happening.
And with banks no longer being the backstop to the muni bond auctions, one wonders how much worse it's going to get. Of course there is "traditional debt," and I'm sure the Fed will be in the mix somehow with all this, but right now there's too many fires to put out.
Risk pollution of toxic debt indee (from EJ's Risk Pollution article 4/2006 - almost 2 years ago).
Looks like the people of Vallejo and California will be the first on the boat USS Hardship.
http://www.bloomberg.com/apps/news?p...efer=worldwide
I'm surprised no one has discussed this yet. To me, this seems like a very, very big deal, and marks the day when the credit deflation started to affect the day-to-day operations of government.
From 1984 through 2006, only 13 auctions failed, typically because of changes in the credit of the borrower, according to Moody's Investors Service. There were 31 failures in the second half of 2007, and 32 during a two-week period beginning in January. That compares with more than 480 failures yesterday alone, according to figures compiled by Deutsche Bank AG, Wilmington Trust Corp. and Bank of New York Mellon Corp.
Uh Oh
City Manager Joseph Tanner says with the city spending more money than it is taking in, by mid-April Vallejo won't have the money to pay its employees
And with banks no longer being the backstop to the muni bond auctions, one wonders how much worse it's going to get. Of course there is "traditional debt," and I'm sure the Fed will be in the mix somehow with all this, but right now there's too many fires to put out.
Risk pollution of toxic debt indee (from EJ's Risk Pollution article 4/2006 - almost 2 years ago).
In truth, no one knows who will be left holding the bag when defaults on loans made using these innovations occur. But we can be fairly certain it won’t be the institutions that made the money selling them. Most likely, it will be the same folks that paid for the Super Fund projects that cleaned up after the chemical industry -- you and I.