Stockton California prepares for biggest municipal bankruptcy in history
Posted: Wed Jun 27, 2012 10:56 am
Permanent Portfolio Forum
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That sounds great to me. It's good to wipe the debt slate clean every so often in this crazy mixed-up economy of ours, not to mention blowing away those irresponsibly unrealistic pension obligations.zenne0105 wrote: Over the past month, three California towns have filed for bankruptcy. First it was Stockton, then the resort town of Mammoth Lakes. Now, San Bernardino also took the plunge. Having these three California municipalities declaring Chapter 9 bankruptcies, Warren Buffet, the billionaire investor, said that he believes the recent bankruptcy filings of three California municipalities could create a climate where cities would more easily consider Chapter 9 as an option for alleviating debt woes.
Many said that, among the three California towns, Stockton, California's bankruptcy could be the largest case ever. And that is not the only record the town has broken of late. It also recently received what amounts to the largest parking ticket ever written. Article here: "Stockton parking garage fiasco". I guess it reiterates a simple financial lesson for us all.zenne0105 wrote: Over the past month, three California towns have filed for bankruptcy. First it was Stockton, then the resort town of Mammoth Lakes. Now, San Bernardino also took the plunge.
But might not the federal gov't step in and buy out the obligations if such municipalites are deemed too big to fail? What would MM Theorists say about this?Pointedstick wrote: That sounds great to me. It's good to wipe the debt slate clean every so often in this crazy mixed-up economy of ours, not to mention blowing away those irresponsibly unrealistic pension obligations.
BearBones wrote:But might not the federal gov't step in and buy out the obligations if such municipalites are deemed too big to fail? What would MM Theorists say about this?Pointedstick wrote: That sounds great to me. It's good to wipe the debt slate clean every so often in this crazy mixed-up economy of ours, not to mention blowing away those irresponsibly unrealistic pension obligations.
Back in 1975 Gerald Ford famously told New York City to drop dead when they begged for a bailout so who knows. But California is one of the biggest economies in the world. If push comes to shove I would be stunned if the Feds let California go broke. Of course it's also worth noting that there is no provision in the Bankruptcy Code for states to declare bankruptcy. Cities can. But states can't.Pointedstick wrote:They certainly haven't so far. The feds have bailed out the government of California repeatedly, but not any municipal governments. I don't think any municipality will really ever be deemed "too big to fail". If a city goes bankrupt, it's not like it's sold off as scrap like when a company does. It may need to sell assets and break obligations, but the city itself will stick around.BearBones wrote:But might not the federal gov't step in and buy out the obligations if such municipalites are deemed too big to fail? What would MM Theorists say about this?Pointedstick wrote: That sounds great to me. It's good to wipe the debt slate clean every so often in this crazy mixed-up economy of ours, not to mention blowing away those irresponsibly unrealistic pension obligations.