US municipalities could default on $100bn, warns Nouriel Roubini thinktank

[CHIMO]

US states and local governments could default on $100bn (£60bn) of their debts over the next five years, according to a report from the consulting firm founded by economist Nouriel Roubini.

The report follows dire predictions of a wide-scale collapse in the US's $2.7tn municipal bonds market by Meredith Whitney, the analyst who was among the first to warn of the 2008 banking crisis.

Roubini Global Economics' forecast is less gloomy than Whitney's, but it warns that investors are being "Pollyannaish" in dismissing the serious problems in the market.

"The municipal bond market has generated tremendous debate in the past months, with Cassandras predicting another 'sub-prime' disaster, while apologists (often with vested interests) claim there is little justification for these warnings," write the authors of the Roubini report, David Nowakowski and Prajakta Bhide. They conclude that while investors do face $100bn in defaults, the problems will not prove "systemic in nature" and will not "infect the financial system, though they will dampen economic recovery."

http://www.guardian.co.uk/business/2011/mar/02/us-municipalities-default-on-debt-nouriel-roubini

[no_hypocrisy]

1. Either the financial planning reps were being ironic or lying.

They told the participants at a seminar last week that MUNI bonds were "safe" and "reliable" investments.

[barb162]

2. I wouldn't be going into munis at this time. n/t