Jefferson County, Ala. may have made progress toward settling its bankruptcy last week, but clouds loom on the horizon for other municipalities, says New York Times columnist Floyd Norris.
"Large municipal bond disasters have been rare, but I suspect there will be more," he wrote. In Jefferson County, an agreement has been reached to stick a 20 percent loss on holders of triple-A bonds.
"The Jefferson County bankruptcy may serve as a precedent for forcing bondholders to take losses in bankruptcy," Norris suggested.
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"Despite lots of legal protections, loans to municipal governments can be just like loans to people and companies: if the borrower truly can’t afford to pay what was promised, it won’t be paid."
The structure of Jefferson County's debt differs from many other municipalities only in its scale, Norris says.
The Alabama county's case included some major corruption. But, "there are other municipalities where crises are looming, even without rampant corruption," Norris wrote.
Financial analyst Meredith Whitney, CEO of Meredith Whitney Advisory Group, also sees major muni troubles ahead. They could even hit Los Angeles, she tells Newsmax TV in an exclusive interview.
"You know, no one mentions L.A.," says Whitney, author of the new book "Fate of the States."
"L.A. is one of the municipalities that's not at risk of default, but at risk of real loggerheads in terms of how deeply do you cut into social services, and how much are you going to push down to localities."
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