Reply #12: Fears grow of euro-style debt crisis in US states [View All]

[ozymandius]

This situation has been brewing since we scuttled Glass-Steagall. The banksters were given free reign to craft exotic instruments that were sold to municipalities as funding mechanisms. Only the poor saps at City Hall did not see that the means of funding bristled with triggers that would explode their debt.

WASHINGTON (AFP) – No sooner has the last crisis ended, than warnings about the next one begin. In the dying days of the year, with the sub-prime mortgage debacle entering the rear-view mirror, economy-watchers are warning 2011 could see US states and municipalities plunge into a debt crisis of that type that has wrought chaos in Europe.

Although the US economy is slowly getting to its feet after a brutal recession, state and local budgets are still prostrate.

The most likely trigger for a crisis would be a major credit rating downgrade that prompts worried lenders to charge states and municipalities more for loans, putting the authorities further in debt.

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I will look for the Meredith Whitney article.