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San Bernardino has voted to become the third California city to file for bankruptcy in the last...

  • Wednesday, July 11, 2012, 2:34 AM ET
    San Bernardino has voted to become the third California city to file for bankruptcy in the last month, after officials reported the city faced an imminent financial crisis. San Bernardino hopes to restructure its finances while in Ch. 9 protection, but a concerned muni bond market may have other plans. (also: Stockton and Mammoth Lakes)
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This news story has 35 comments:

  •  
    MUB since Stockton Bankruptcy..up .62%....CMF up 1.06% but we will see
    what it does today...
    11 Jul 2012, 02:56 AM Reply Like
  •  
    Looks like Meridith Whitney was a bit early but the muni's are starting to fall now.
    11 Jul 2012, 03:25 AM Reply Like
  •  
    good one...is that a joke?

    less than 20 defaults out of +3000 issuers

    Mammoth Lakes is due to a $40 mill judgement against it that it has to pay to a developer.

    wake me up when the number hits 300

    E
    11 Jul 2012, 05:17 AM Reply Like
  •  
    Good luck on your wish for bad luck.
    11 Jul 2012, 08:34 AM Reply Like
  •  
    Meredith was and remains clueless,but let's hope she can instill another muni panic, wiser investors can make another killing.
    11 Jul 2012, 10:25 AM Reply Like
  •  
    She is very intelligent; saw clearly what was to come. By coming out and warning, she spurred many local governments to take action, and thus probably prevented or at least reduced the impact of the crisis. Read some of her reports sometimes.
    12 Jul 2012, 10:10 AM Reply Like
  •  
    Perspective....there is 2.7 trillion in municipal debt outstanding...but
    why would the editors at Reuters want to soften the hysteria??
    11 Jul 2012, 03:29 AM Reply Like
  •  
    "Third California city to file for bankruptcy in the last MONTH"....not the last "decade".

    There have been only 49 city/county bankruptcies in the U.S. since 1980. Now we see 3 in California in a month.

    Maybe the canary in the coal mine is just asleep, and not dead. I'm leaving the coal mine for now....just in case.
    11 Jul 2012, 12:45 PM Reply Like
  •  
    Lets put this in perspective. Its California......
    11 Jul 2012, 02:45 PM Reply Like
  •  
    Scranton ain't. Coming soon....
    11 Jul 2012, 03:23 PM Reply Like
  •  
    It is beginning. California is broke, 19 billion. Illinois, New York, New Jersey, all the big social democratic states are in the worse shape and not getting better. The country is being ruined by lazy people who are voting for handouts and our present government loves that. We better make a change in November or we are in deep crap. The Fed or ECB, nor China can do anhything to stop the crisis that lies ahead. Keynesianism is dead.
    11 Jul 2012, 06:09 AM Reply Like
  •  
    FWS, You're right. It is the beginning. Ca, Il and NJ are in big trouble. NY not so much. While there are many lazy people looking for handouts, the blame should fall on the US Govt's actions over the past 32 years spending more than it has received in taxes and the Fed for their ZIRP. Ultimately, we the people, are responsible for allowing it to happen.
    11 Jul 2012, 06:26 AM Reply Like
  •  
    Actually, there's nothing "liburuhl" about SanBerdoo (as we called it -- grew up near there). It's a redneck hellhole. Nothing but monster trucks and Ted Bundys rotting away in suburbia. A lot like parts of Texas or OK. It was founded by Mormons, btw, and is still very much under Mormon influence.
    11 Jul 2012, 10:09 AM Reply Like
  •  
    I would try to misdirect too if I was from California...LOL
    11 Jul 2012, 10:15 AM Reply Like
  •  
    Anonymous

    When half of the people get the idea that they do not have to work because the other half is going to take care of them; and when the other half gets the idea that it does no good to work , because somebody else is going to get what they work for, that is the beginning of the end of any nation.
    11 Jul 2012, 11:35 AM Reply Like
  •  
    SD is right, it pretty much sucks.
    11 Jul 2012, 12:13 PM Reply Like
  •  
    Actually, all of these places are going broke because we are funding the rest of the country. If it's about handouts it's about medicare and social security for parts of the country that don't produce much revenue. i.e. the so called red states that are so against government until it comes time to get what's theirs.
    11 Jul 2012, 12:19 PM Reply Like
  •  
    Wait you think Mitt and Republicans will improve socially democratic state?
    11 Jul 2012, 01:13 PM Reply Like
  •  
    You are looking at a glass half full what are you illing to cut and suffer the consequences on your side of the isle
    11 Jul 2012, 01:15 PM Reply Like
  •  
    Irony beyond belief.... Think Mitt will help them because they are Mormon with some Fed handouts good grief
    11 Jul 2012, 01:17 PM Reply Like
  •  
    Muni CEF Yields continue to decline as Issuance declines and Coupons fall. Watch out paying too much of a Premium to own a Muni CEF or ETF. Texas has $13 Billion in debt swept into the next biennium to meet the mandated Balanced Budget, so nothing special about Texas Muni's as a safe haven. PZA, HYD & HYMB remain interesting for those in the 35% Tax Bracket. Pray the next President does not diminish the TAX FREE status of Muni's!!
    11 Jul 2012, 07:06 AM Reply Like
  •  
    Nooooo I love California! Well...the beaches and Orange County/San Diego :) :)
    11 Jul 2012, 09:24 AM Reply Like
  •  
    A lot of California city bankruptcy is due to the fact the State (California) drained property tax from local governments to the state coffers. This is as much a California crisis as it is an individual city crisis.
    11 Jul 2012, 10:15 AM Reply Like
  •  
    Always a voice of reason. Thanks

    G
    11 Jul 2012, 10:31 AM Reply Like
  •  
    What would fat local cats look like in your world lol
    11 Jul 2012, 01:18 PM Reply Like
  •  
    As cities, and eventually, states start to fall, the parasites will move on to those areas that can still pay. Those areas had better get ready now. They'll need residency status to collect, perhaps one year residency eg..
    Either way, these people who believe the world owes them a living will eventually resort to violence to get what they want; aided and abetted by the federal government and police, no doubt.
    11 Jul 2012, 10:56 AM Reply Like
  •  
    I predict sales of hardhats to be significant as people protect themselves from falling bits of sky ... and just as they were getting back on their feet from their tulip investments.
    11 Jul 2012, 11:07 AM Reply Like
  •  
    Meredith was early. Wait until the GASB makes the changes they have slated for next year. Kevin Williamson has a great article about what’s to come: http://bit.ly/LlE3a2

    “…State and local governments have, for the most part, woefully underfunded their employee-pension systems. As a result, they have massive unfunded liabilities for future pension payments — liabilities that total as high as $3 trillion, by some estimates. They can’t forgo writing those pension checks, they don’t have money set aside to cover those pension checks, and they are promising ever more generous pension checks in the future.”

    “If unfunded pension liabilities must be considered “on an equal footing” with other obligations, then the credit position of a great many state and local governments will be degraded.”
    11 Jul 2012, 12:21 PM Reply Like
  •  
    The is like listening to Bear market news where the people are absorbed by a self fulfilling prophecy
    11 Jul 2012, 01:20 PM Reply Like
  •  
    Where is the genius now who told me 2 weeks ago that the Stockton bankruptcy wasn't a big deal? Do you realize what these bigger cities going bankrupt means and that now a precedent has been set? Now any other California cities that were wondering how the process gets started simply have to hit the print button on their computer and they get to file a chapter 9 themselves.

    California is always the first state and as it goes, so goes the rest of the country. Over the next few years we are going to see hundreds or thousands of cities going bankrupt. The ponzi scheme of gloriously unfunded pensions with full health care benefits is a gaping suck hole on America. It all starts with social security, medicaid, and medicare and then spreads out into the states with things like ridiculous government pensions. This stuff simply cannot be paid for any longer and all the people relying on government for money are going to be sorely, sorely disappointed in the not too distant future.
    11 Jul 2012, 02:27 PM Reply Like
  •  
    SS is in good shape, not a sink hole, as employees and employers both contribute to it. It will start to be not fully fund ongoing outlays I think about 2037, but that is due to less children being born since the 70s. A good fix is to simply up the limit that applies to payroll deductions. Has been done several times before. But now it is a TAX increase, heavens, and so the logical thing to do is run from the situation.
    11 Jul 2012, 03:18 PM Reply Like
  •  
    It's California. The rich cities get richer and the poor cities get poorer. It's becoming more difficult to move up the ladder in today's society regardless of intelligence or work ethic. It is almost as if a class system is developing. Of course this has a whole lot to do with the unemployment rate in California and the U.S. as a whole.

    What CA city is next to file? One of the many small cities in East LA such as Compton is my guess. Stockton and San Bern are definitely two of the more scummy cities in the country and I am expecting this pattern to continue. Mammoth was a fluke due to a lawsuit.
    11 Jul 2012, 03:52 PM Reply Like
  •  
    The only "class system" that's developing is those that want to work for a living and those that would rather collect government freebies.
    11 Jul 2012, 04:27 PM Reply Like
  •  
    When you cut Federal taxes to the lowest level in 50 years, start two ten-year wars and don't provide any money to pay for them and then throw in a prescription drug plan and finance it to the tune of $50 billion a year, you have the makings of a financial disaster and soon we will get to see what that disaster looks like. The only country in the world that has any substantial stimulus is China and it cannot provide the economic engine to drive the world. American consumers do not have the funds to drive the world economy anymore. Wages have been stagnant to downward and unemployment is likely to stay high with no means to power our economy. State and city governments received big reductions in revenue from the Federal government for their 2012 budget. Last year the stimulus spending provided them with funds to balance budgets, but not this year. One result: Cities, counties and towns are getting fewer dollars from state budgets. Hard for them to make up the revenue loss because of limited places (or votes) to raise revenue. Kinda a vicious cycle, I'd say. Borrowing by many of these cities and states is only 5 or 6% of their budgets, so they will have places to cut before attacking their lenders. Most want to preserve their credit ratings, so they can borrow in the future. I do not believe most political leaders want to destroy their ability to borrow so they will fight not to destroy their credit. One of the biggest shortfalls has been unfunded pension plans, meaning state after state and city after city has failed to pay into their pension plans the amounts needed to keep them fully funded. They stole the funds for other purposes, exactly like the Federal government stole money from the Social Security Trust Fund over a great many years. Now, we're approaching the time when we have to pay for those wreckless decisions. Sorry to deliver so much bad news, but all of these things bug me and now I feel a tiny bit better to get it off my chest. Thanks, for listening.
    12 Jul 2012, 11:38 AM Reply Like
  •  
    Each year, California governments with the rating agents looking the otherway have borrowed huge amounts of money by selling low cost municipal bonds in late July to finance the period until they collect the majority of their tax revenues in December and April. The State of California was expecting to borrow $28 billion and municipal governments were anticipating borrowing anther $50 billion. The state deficit is running $9.6 billion.

    California also wants to do a rail "stimulus" program. Moody’s who was expected to provide the credit rating to justify selling the debt, has just tripled their estimate of the state’s unfunded public pension liability from $38.5 billion to $109.1 billion liability and raised the annual cost of state pension funding by $7.3 billion.
    14 Jul 2012, 12:26 AM Reply Like
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