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Meredith Whitney defends her 60 Minutes claim that a wave of municipal defaults will spark a...

Meredith Whitney defends her 60 Minutes claim that a wave of municipal defaults will spark a selloff in muni bonds, hurting economic growth and causing "a lot of social unrest." And there won't be any bailouts, she says: "Who in Nebraska's going to want to bail out someone in Florida?" These 16 cities face bankruptcy without big cuts.
Comments (61)
  • Just the next shoe to drop! So many shoes on the floor now, soon we'll be all shoeless, joining the disenfranchised majority of society, with the exception of the top 10% who own 70% of the nations wealth.
    21 Dec 2010, 05:57 PM Reply Like
  • It's the unfunded public service employees and their pensions. The game is unsustainable.
    21 Dec 2010, 07:04 PM Reply Like
  • They are certainly PART of the problem.
    21 Dec 2010, 11:32 PM Reply Like
  • What's a matter Meredith??? You moved on from the banks???
    21 Dec 2010, 05:59 PM Reply Like
  • Impressive...-15 for dissing Meredith...
    22 Dec 2010, 03:21 AM Reply Like
  • not for "dissing" so much as simply you're wrong. She maintains banks are crap, being completely propped by Fed (read: our) money.
    22 Dec 2010, 07:29 AM Reply Like
  • You hope I am wrong....either way good luck....
    22 Dec 2010, 08:40 AM Reply Like
  • I'll bet she is proven right.
    21 Dec 2010, 06:05 PM Reply Like
  • The Business Insider story makes no sense. They are claiming cities with as low a deficit as 1.7% of their operating budget will file bankruptcy. Too bad they don't try to explain how that small a deficit equates to default. Looks like another one of those fear mongering stories.
    21 Dec 2010, 06:08 PM Reply Like
  • Yes. The world is ending. These are the signs.


    Sales tax receipts in Dallas in November are up 8% YOY. Howm many other major metros aer experiencing the same? Hint. Dallas is no orphan


    Old Navy ran out of pyjamas last weekend. They ran out.
    Coach has run out of many styles of bag.


    What does this tell you? Think. Don't just parrot each other's nonsense


    Some cities may default or restructure. But this will be limited and it is the tail end of the problem.


    21 Dec 2010, 08:18 PM Reply Like
  • The wizened would know Wimpy has eaten a lot of hamburgers and now suddenly it’s Tuesday.
    21 Dec 2010, 08:31 PM Reply Like
  • It's amazing how many people have extra funds to shop this season given they're not making mortgage payments.


    Here in Phoenix there's $100 MILLION per month in unpaid mortgage payments. Now multiply times all the big cities. Recipe for higher-than-anticpated retail sales in the works people. But of course, it will come out as positive news for the economy.
    21 Dec 2010, 08:57 PM Reply Like
  • Well, look at the bright side of your hypothesis - at least they're spending the money and not stuffing it in a mattress.


    Myself, I wouldn't really enjoy Christmas / presents / etc. when I knew a foreclosure was hanging over my families head.


    They probably bought that new flat screen TV with unemployment compensation, too.
    21 Dec 2010, 09:10 PM Reply Like
  • Tells me the reports that retail was keeping very tight inventories was true....though PJs made in China aren't exactly what I would call a monumental economic indicator. It's good stores are running out...means they had the right amount of inventory and won't be stuck with stuff they can't get rid of.


    I agree, the crowds at the stores have been good....but not stunning. We have a long way to go if this is truly a recovery....but with Fed and US govt pumping huge amounts of $$ into the fray to keep things looking spiffy makes me very nervous. The Fed holding over $2 Trillion in debt (with more to go) and the US govt running a $2 Tril deficit for FY2010...makes me very leery.
    21 Dec 2010, 09:25 PM Reply Like
  • Sounds a lot like Ben....


    Is that you Mr. Bernanke? Green shoots = Old navy pajamas


    love it...
    21 Dec 2010, 10:57 PM Reply Like
  • It mean that their Chinese manufacturer needs to work their employees harder for an extra bowl of rice.
    21 Dec 2010, 11:56 PM Reply Like
  • to feed the armageddon pitchfork crowd....
    22 Dec 2010, 03:08 AM Reply Like
  • "Old Navy ran out of pajamas last weekend. They ran out."


    "What does that tell you?"


    When many are foreclosed and the utilities are shut off, pajamas keep you warm. Makes sense...good catch there doc!
    22 Dec 2010, 07:36 AM Reply Like
  • Seriously think the weekly $10's of Billions being pumped into the market by the Fed is positive? That it reflects a market that is healthy enough to stand on it's own? $2 Trillion POMO the first time and as soon as the second is announced the market pops on the news and has ben running up with this latest $600 Billion. If banks and the market are in such wonderful shape, why is this necessary?


    Yes, I'm very worried that this will end badly. Maybe it won't and you and econodoc can pop a bottle of Louis Roederer's Cristal, but until I see the market stand all by itself without trllions being injected..I'll keep my pitchfork.
    22 Dec 2010, 07:38 AM Reply Like
  • People I don't mind the thumbs down...but at least have the testicles to comment as to why. If you think POMO is a great thing and says the market is fine say why. I would seriously be interested. I'm here to learn more. Change my mind if I'm wrong. Maybe you won't, but I at least respect your know the healthy debate thing.
    22 Dec 2010, 09:00 AM Reply Like
  • I was shopping this week and it seemed to me that the stores had plenty of inventory, maybe too much considering how close we are to Christmas.


    Wal-Mart had overflowing amounts of toys still left. Same for Toys-R-Us.


    I think Christmas sales will disappoint. With all the hype we've been hearing, it would be hard NOT to disappoint.
    22 Dec 2010, 09:25 AM Reply Like
  • and Amazon is out of Kindles or close to


    so what does it mean?


    the Old Navy, the Coach and the Kindle shopper are diffferent people.


    this is broad. these are not machines buying this stuff


    when was the last time any of you heard of inventory problems and shortages? what does that mean for 2011?


    how is it possible given the narrative of gloom?


    read the signs and not yout biases


    a lot of you have been wrong for the last 600 points. that's an eternity. you still have an opportunity the market is going much higher over the next 18 months. after which it will fall. my guess is you have another 400 points of being wrong ahead of you by which stage a lot of you will be on the band wagon just as some of us are getting back into bonds and cash.


    Macallan 25 Marketgoy. That's what you need to send me. I hope you can cover. I doubt you have the wherewithal. If you can't it won't be a surprise.


    We are spending Christmas and New Year in San Francisco and Tahoe. 8 feet of snow!


    Good Luck to all and do not let the Top 50 Commenters fool you.


    "Negative Thumbs from the SA Crowd are the best contra indicator you can find. Period"


    Bernanke For President.


    22 Dec 2010, 09:44 AM Reply Like
  • Pomo is a sideshow that gets idealogues all excited....look at the corporate bond market....
    22 Dec 2010, 11:30 AM Reply Like
  • like me learn to enjoy the thumbs down...I have thousands...
    22 Dec 2010, 11:32 AM Reply Like
  • What you care about the foreclosed you want Ron Paul to implement
    a crazy monetary policy so we can have 25% unemployment....
    22 Dec 2010, 11:38 AM Reply Like
  • Bro, please explain to us how exploding federal deficits, the govt propping up housing - autos - banks and the proliferation of more ponzi loans VIA FHA is a great long term policy?


    Would it not be better to try to rebalance this BLOATED economy from finance and real estate to more productive sectors of export like high end mfg, alt energy, mass transportation and environmental conservation? This would make our economy more globally competitive not the continuation of the current economic mirage fiannced by ponzi loans.
    22 Dec 2010, 11:44 AM Reply Like
  • Is it possible by one metric America is in its best shape in 20 years...


    Household debt service payments 1.358 trillion
    Government Interest payments .402 trillion


    minus Annual Personal Savings .666 trillion


    1.094 trillion
    divided by GDP 14.750 trillion equals
    7.42% for 3rd qtr 2010


    20 year high was 3q 2007 at 11.92%


    20 year low was 4q 1992 at 7.33%


    20 year average 9.7%
    22 Dec 2010, 12:05 PM Reply Like
  • bbro I see that now...embrace the TD!
    22 Dec 2010, 03:33 PM Reply Like
  • Econo get a TU for your choice in Scotch.


    American made I would recommend Buffalo Trace is smooth.
    Presently Scotch wise I've got a 1988 Glenrothes...amazingly fine.
    22 Dec 2010, 06:47 PM Reply Like
  • NYC is a cesspool of subsidized and entitlement generated living, fraud, corruption... And it ain't even half as bad as it was 15 years ago, just think about that..


    If Bloomberg started cutting some pork out of the system NYC would be making cash hand over fist.


    Most recent: $80m in embezzled funds in a project meant to automate city payrolls and cut the lard. It's probably more than that in reality, that's just how much they found.
    21 Dec 2010, 06:08 PM Reply Like
  • I agree with Kmi, New York has too much spending waste...
    21 Dec 2010, 07:04 PM Reply Like
  • Hmmm, and NY controls the most the markets. Fed$= new highs.
    21 Dec 2010, 08:08 PM Reply Like
  • Who in Nebraska will want to bailout Florida??? It's almost an irrelevant question at least in the House. There representation is down by population. The bailout states likely include Calif., Illinois, Florida, NY, etc. All are major population centers. The Senate will go along because they will realize the consequences of not doing so. Has the EU already bailed out countries? Are they even one nation as the US is? If it comes to that, there will be bailouts. The real question is, what demands will the national government make vis-a-vis balancing the state budgets, etc.? EU like austerity in CA, IL, NY, etc. would have a significant effect on the US economy.
    21 Dec 2010, 06:13 PM Reply Like
  • The U.S. government can't impose EU-style austerity measures on the states / munis unless they let them go through the bankruptcy process. It's all about the pensions / benefits, and bankruptcy is the only way to address those problems.
    21 Dec 2010, 06:55 PM Reply Like
  • 1.7% budget deficit is reason for bankruptcy?
    21 Dec 2010, 07:00 PM Reply Like
  • I think in the end this is all about unfunded liabilities such as pensions. Additionally, many of these states have huge borrowings and declining real estate tax revenues. The future leads only to austerity.
    21 Dec 2010, 07:05 PM Reply Like
  • The losses a lot of companies and individuals took over the last few years will leave tax receipts busted for at least a couple of years, compound that with everyone filing tax challenges on their property taxes to get them reduced, the "unemployed" working for cash, the growing barter economy, and I think it gets much more complicated.


    Pensions and gov't employment are good places to look at to cut spending, but if it doesn't go deeper we'll be right back here tomorrow.
    21 Dec 2010, 08:00 PM Reply Like
  • The fed may bail them out for a little while. That way congress can act like they kept their hands clean.
    21 Dec 2010, 07:37 PM Reply Like
  • "They are claiming cities with as low a deficit as 1.7% of their operating budget will file bankruptcy"


    First, bankruptcy isn't about income and expense. It is about existing debt and the ability to refinance it. You can have a budget surplus, and be unable to refinance your existing debt. So if you run a 1.7% deficit long enough, it will catch-up with you.


    Second, you are looking backwards. These municipalities have growing expenses and declining revenue, ie the property tax base is fading.


    Whether she is right at this time or a year from now. She is pointing to real problems.
    21 Dec 2010, 08:04 PM Reply Like
  • "First, bankruptcy isn't about income and expense. It is about existing debt and the ability to refinance it. You can have a budget surplus, and be unable to refinance your existing debt. So if you run a 1.7% deficit long enough, it will catch-up with you."


    "Second, you are looking backwards. These municipalities have growing expenses and declining revenue, ie the property tax base is fading."


    You are assuming facts not in the article. I'm not saying your facts aren't correct. I'm saying we don't know. The only evidence the article gives for bankruptcy is a 1.7% deficit. That's not a very strong case.


    And BTW those comments were from the Business Insider, not Whitney.
    21 Dec 2010, 08:48 PM Reply Like
  • "First, bankruptcy isn't about income and expense. It is about existing debt and the ability to refinance it."


    It can be. But it doesn't have to be. Bankruptcy can also be about cash flow - which can be an income and expense matter. Or for a municipality, it can be when you get your income versus when you pay your expenses. If property tax is collected once a year but expenses are paid every day, the expense money going out may be needed before the income money comes in. So your budget can be in surplus and you still can run out of cash.


    All of which goes to my basic point - citing a 1.7% deficit by itself does not paint a very strong case for bankruptcy.
    21 Dec 2010, 08:55 PM Reply Like
  • Meredith Whitney identifies a real potential crisis. Local governments and States are facing major fiscal challenges and it is unclear that the political will exists for these challenges to be adequately addressed.


    It now appears likely that the US, more through inadvertence than intention, is preparing to see whether its political culture and federal system together are better placed to deal with fiscal crises of its constituent States and local governments then are the EU and Euro Zone prepared (faced as they are with the added challenges of inadequate central fiscal institutions) to deal with the fiscal crises of its constituent States such as Ireland. Obviously in addressing this issue, opinions within the US will differ fundamentally over what would represent an appropriate way to deal with such crises. This very deadlock of opinion, buttresses by embittered political stalemates at the local, State and Federal Levels of Government, may place the US at a disadvantage in comparison to the EU and Euro Zone despite the more fully formed institutional framework (particularly institutions dealing with fiscal matters) of the US federal union.


    My real concern is simply that there will be bloody-minded deadlock all around and, should a real crisis materialize the political process will not be able to respond coherently (leaving aside whether that response should be conservative, progressive or whatever).
    21 Dec 2010, 08:09 PM Reply Like
  • ...and on the federal level...all is well...
    The Fed is now holding over $1 Trillion in US Treasuries and over $1 Trillion in MBS and agency debt.
    www .zerohedge .com/artic le/fed-tre asury-hold ings-10003 41000000


    Additional ly, the US Govt actually ran a $2 Trillion deficit for FY2010.
    www .reuters.c om/article /idUSTRE6B K6WC201012 21
    21 Dec 2010, 09:15 PM Reply Like
  • Your heirs will not thank you for slavishly following zerosense.
    21 Dec 2010, 11:33 PM Reply Like
  • Econodoc....I left equities a while ago when it became obvious books of banks and many corporations get cooked and many items are kept off account.
    That to me is dishonest business. I know the market is a game...but I don't like dishonesty, and there is too much of that going on. I play with Silver and undeveloped properties, 2 areas where zero hedge really doesn't go (they prefer gold and only talk about housing)...but they also don't like dishonesty...that would be my attraction. As to my far all three are doing quite well. But you and I should both be worried about a government that has absolutely no control over their spending...because that is something our heirs will have to deal with.


    Have a Merry Christmas Sir!
    22 Dec 2010, 09:06 AM Reply Like
  • The state of NC is broke and is definitely getting ready to lay off a bunch of people, and this isn't the worst state by any means.
    21 Dec 2010, 09:32 PM Reply Like
  • NC is not broke....
    22 Dec 2010, 03:07 AM Reply Like
  • The governor thinks it is.
    22 Dec 2010, 09:26 AM Reply Like
  • Today Governor Perdue introduced her plans to restructure state government in the face of a $3.5 billion budget deficit. This plan is still evolving and we will learn much more about the details when the Governor’s budget is complete in February. After that, the Legislature will go to work on its budget.


    Effective immediately, all cabinet agencies are under a hiring freeze for all non-critical positions. Specific guidance on implementing the hiring freeze will be forthcoming from the Office of State Budget and Management.
    22 Dec 2010, 09:33 AM Reply Like
  • You use the term broke...which means they go out of business..state
    of NC will not go out of will make budget which will be very painful (and maybe not all that bad in the long run)...
    22 Dec 2010, 11:35 AM Reply Like
  • I think that, to most people, "broke" means you are temporarily out of money, not that you are completely out of business or bankrupt.


    It's that "very painful" part of your comment that I think will throw a monkey wrench into all the economic euphoria we've had lately. I'm guessing things start turning sour late Jan. to March.


    I hope like hell I'm wrong.
    23 Dec 2010, 11:29 AM Reply Like
  • We're all just tap dancing on the deck of the titanic. The world is beginning to abandon the use of the dollar and the FED is printing it into oblivion.


    Nothing else matters when your country is about to collapse from hyperinflation.


    Food, water, ammo. That is all you need to worry about at the moment.
    21 Dec 2010, 11:09 PM Reply Like
  • I happen to live in a middle-income area of one of the cities facing bankrupcy. In the last couple of weeks, there have been notices posted
    along streets in our neighborhood stating that the landscaping will be removed because the city doesn't have the budget to maintain it. If enough residents volunteer to maintain it, the city (San Jose) will let it stay.


    Penny wise - Million dollar foolish when you consider all the other wasteful spending (union pensions, etc...)


    Side note: I volunteered to maintain the landscaping and the city will at least provide workmans comp coverage in case I get hurt trimming trees or pruning other scrubs.
    22 Dec 2010, 02:04 AM Reply Like
  • Side note: I volunteered to maintain the landscaping and the city will at least provide workmans comp coverage in case I get hurt trimming trees or pruning other scrubs.


    Are you serious???
    22 Dec 2010, 08:45 PM Reply Like
  • I'll bet you get a bill and/or summons for doing something afoul of some local regulation.
    23 Dec 2010, 12:51 PM Reply Like
  • Will some of you bears please sell this market off...Please....
    22 Dec 2010, 03:07 AM Reply Like
  • I wonder bro were you so optimistic early 2009 or are u now a typical pumpmonkey at the top.
    22 Dec 2010, 10:23 AM Reply Like
  • I don't have -3000 on my comments for nothing....
    22 Dec 2010, 01:03 PM Reply Like
  • I am baffled by most comments here. Who among those denying there is a problem getting ready to explode treats their own household finances in the same way that way too many states and cities do;i.e. when things are tough just put more on credit cards, borrow more , give the kids more money, and just keep spending like the party will never end? Or, do you go to your boss and tell him you MUST have a raise because you spend too much (any different than the pols telling the taxpayers they MUST raise taxes?)
    Don't most of you all think that one day, maybe not next year but one day, the party must end badly?
    By the way, all these thoughts are just as applicable at the federal level only with a huge multiplier.
    22 Dec 2010, 04:02 PM Reply Like
  • The sooner the party ends the better. Your analogies were very good, by the way.
    22 Dec 2010, 04:19 PM Reply Like
  • Everybody's bullish now. Don't confuse them with the facts.
    23 Dec 2010, 11:31 AM Reply Like
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