Municipal Bond Forum
New York Times article defies common sense
Q
According to the New York Times, there are discussions in Washington that would allow states to declare bankruptcy and be relieved of their pension and municipal debt obligations. In your opinion, what is the likelihood that laws/rules will be made to allow states to default on their municipal bond debt? If this is allowed, what effect could it have on municipalities, counties, hospitals and other issuers of muni bonds? Could it possibly have any effect on bonds escrowed to maturity?
A
James A. Klotz responds:
We saw the article and were dumbfounded by the reporting. There were no reliable sources to support the article’s main assertion, and a key point was mischaracterized. Most important, however, is the fact that it defies common sense. We explore it further here: “New York Times Article Grabs Headlines, Defies Common Sense.”
Start here.
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