Sunday, June 25, 2017

BAILOUTS ALERT: Are States The Next 'Too Big To Fail'?

The possibility of state bankruptcies is not far-fetched,
with the closest thing to a state bankruptcy already 
playing out in Puerto Rico. (AP)
In the film "Too Big to Fail," then-Federal Reserve Chairman Ben Bernanke defended a bailout of the country's collapsing banks. "(If) we don't do this now, we won't have an economy on Monday," he pleaded.
Don't be surprised if you hear a similar argument in the not-too-distant future. But this time the bailout targets won't be banks. They'll be states – states drowning in pension debt.
In the Great Recession, it was subprime mortgages that pushed the financial industry into bankruptcy. Initially rated AAA, many of those mortgage-backed securities became worthless once rating agencies valued them for what they were worth.
In a flash, hundreds of billions in bank capital was wiped out, and "too big to fail" became the justification for bailing out the finance industry.
Today, states across the country are suffering from their own version of subprime mortgages: public sector pensions.
State governments face some $3.8 trillion worth of public pension debt, according to Joshua Rauh of the Hoover Institution. And those pensions are threatening to take more than a few states down.
Read the rest of the story HERE and follow links to related stories/opinions below:

Don't Bail Out Failing States Like Illinois

Illinois May Be On The Verge Of Bankruptcy

Stephen Moore: The Banana Republic Of Illinois

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1 comment:

Dotty042 said...

Thought of Michigan first because of Detroit!!!