Since 1937 there have been a total of just 623 Chapter 9 filings in the United States, with 252 of them coming in the past 30 years. Compare that to the 13,500 Chapter 11 filings entered in 2010 alone.
The Depression-era bankruptcy code provision known as Chapter 9, which lets local governments seek protection from creditors while restructuring debt, is a rarely used tool.
Yet with local governments throughout the U.S. continuing to suffer the lingering effects of a sputtering economy, state lawmakers are apparently sensing a possible surge in new Chapter 9 filing–and are moving to stop it before it starts. Source: AM Law Daily (1)
Nations, states gone bankrupt before
The possibility of a US state defaulting on its debt are not as scary as it seems. Historically it has happened before. It has also happened to entire nations relatively recently. The big issue may be what happens to the creditors. A default could trigger a domino affect the likes of which brought down the markets in 2008 and that cause the EU to bail out Greece.
While it is certainly in everyone’s interests to come up with a way of dealing with a debt default the solutions proposed are the same old stuff and nonsense that has kept the world banking systems lurching along since 2008. They merely prolong the agony of debt contraction that is projected by some to take a decade.
Maybe it is time to face facts. The US, and many other nations, are technically bankrupt. Creditors are not going to get their money back. By propping up the system they are throwing good money after bad. Maybe the entire world should put itself into bankruptcy court and clean house. Start over tomorrow rather than wait for ten years.
From the chart it is clear that Illinois has the highest probability of default. How sadly ironic for a state that only recently made a pitch for the 2016 Olympics and is the home of the current US President and whose license plate motto is “Land of Lincoln”.
Illinois ready to blow
Honest Abe, who once closed his store and walked several miles to return the correct change of 6 cents to a customer, would be appalled at Illinois that now is about $6 billion behind in payments to local vendors, many of who provide medical and social services to the most needy.
As this article points out , under US law, a State cannot declare bankruptcy. However Illinois can still default on interest payments on its debt. At that point , the US Gov’t would put Illinois into receivership and appoint an accountant to make sure the bills got paid and force creditors to accept settlements of debts. How ironic that the Obama administration which has run up a massive deficit , would be in charge of untangling Illlinois’ finances.
References:
No comments:
Post a Comment