More Cities on Brink of Bankruptcy

[Joanne98]

Source: CNBC

The possibility of a bankruptcy filing by the city of Harrisburg, Pa., the state capital, looms large these days-and it could be the first in a series, say some Wall Street traders.

Harrisburg, population 55,000, owes nearly $70 million in debt payments this year, and it's unclear where that money will come from. Harrisburg now has one of the lowest credit ratings of any municipality in the United States.

Harrisburg Mayor Linda Thompson told CNBC Wednesday that she had assembled a group of bond stakeholders, the city council and other interested parties to work out the crisis "so that we don't become the poster child of the world in terms of bankruptcy."

Municipal bond underwriters are monitoring Harrisburg, which has struggled to contain the costs of financing a troubled incinerator project.


Read more: http://finance.yahoo.com/news/More-Cities-on-Brink-of-cnbc-846713446.html?x=0&sec=topStories&pos=2&asset=&ccode=

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But investors and the Street can also short munis through credit default swaps, or CDS policies that pay out if an entity defaults.

The Markit MCDX, an index that tracks the cost of insuring against default of a basket of 50 municipalities, is on a recent high of $173,000 for $10 million of protection on a five-year bond-a point last reached near the beginning of this year. A swap that would pay out if the state of Pennsylvania defaults cost $112,000 for the same $10 million amount.


We need the names of the people buying the credit default swaps!

[NoNothing]

1. What are you suggesting?

That the city officials are betting against the same bonds that they issue?

[DJ13]

2. More like those who wrote the initial bonds have bets that they will default

Think Goldman Sachs and the housing market in 2007/8.

[NoNothing]

3. What do you mean?

The cities are the ones who issued the bonds. Are you talking about the bondholders?

[trungpa ricochet]

4. Read it and weep

http://www.rollingstone.com:80/politics/news/;kw=%5B3351,53763%5D

:grr:

[Greyhound]

5. Bad link. n/t

[unhappycamper]

6. And meanwhile we piss away $200,000 a minute in the sandbox.

:(

[JDPriestly]

7. L.A. is in terrible trouble, but the wealthy folks here are doing just fine.

Just fine indeed.

We need a whole new tax system. If we must have this world economy and free trade than we have to tax things that come into and go out of our country, not people.

When labor had the money, taxing labor worked. When small businesses had the money, taxing them worked. Now, you have to tax the Chinese imports at the point of sale and forget about taxing labor and small business or at least cut the taxes on labor and small businesses.

Stop taxing paychecks and employers here and start taxing all the products (most of what we buy) that comes from overseas.

[JackRiddler]

8. The bond markets have no reason to do anything other than burn the world.

It's much easier to make money that way.