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The Gathering Pace Of Muni Fails

Tyler Durden's picture


The can has been kicked. The austerity has been implemented. The revenues have fallen. And as we see in the chart below, the pace of local government distress is accelerating. As has been made so clear in the past, defaults cluster; and sure enough it is starting, as tensions between unions and city managers become irreconcilable.

The pace of local government distress is accelerating...


Meanwhile budget gaps are increasingly in need of political solutions...


But the 'fiscal cliff' hinders any reality of a solution coming from the top...


Source: Morgan Stanley


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Tue, 07/17/2012 - 09:36 | 2623894 hugovanderbubble
hugovanderbubble's picture

Ding Dong...

Tue, 07/17/2012 - 10:25 | 2624094 El Oregonian
El Oregonian's picture

Wake me up when the city of Washington DC (Demented Convicts) goes belly up. Now, when that one goes down the crapper we can finally take back control.

Tue, 07/17/2012 - 09:37 | 2623896 LawsofPhysics
LawsofPhysics's picture

Paging Ms. Whitney...  Paging Ms. Whitney...

Tue, 07/17/2012 - 09:43 | 2623916 francis_sawyer
francis_sawyer's picture

LOL ~ I kno you're talking about Meredith Whitney... but everytime I wee 'Whitney' it reminds me of 'Rich Whitey'


Tue, 07/17/2012 - 10:01 | 2623980 Bicycle Repairman
Bicycle Repairman's picture

and it's not a skit from the Chappelle show.

Tue, 07/17/2012 - 09:48 | 2623935 Village Smithy
Village Smithy's picture

So many media shills that just couldn't comprehend the fact that an increase in a nation's debt of 1 trillion dollars per year is going to hide a lot of shit and skew a lot of data had a big laugh at her. (S)He who laughs last lasts best.

Tue, 07/17/2012 - 10:06 | 2624001 ghenny
ghenny's picture

Go Meredith.  The financial press corporate shills are going to be eating some humble crow this year and next.  And for those Colorado water comments you aint seen nothing yet.  By the time this drought is over and they peak on abusing the aquifers and rivers in the west to feed the big agrbusinesses and the retiree golf courses their all going to be screaming for Great Lakes water.  No dice folks we're not shipping one pint West.  Use all that oil and gas you have to build deslinization plants or better yet drink it.

Tue, 07/17/2012 - 10:46 | 2624180 Doubleguns
Doubleguns's picture

or better yet drink it.


I heard it makes great coolaid.

Tue, 07/17/2012 - 11:35 | 2624429 potlatch
potlatch's picture

As a denizen of the great lakes area, I can report, we are already passing new laws called "Stand your water" laws, and it involves the right to shoot anyone who so much as dips a straw to my fuckin lake.

Tue, 07/17/2012 - 09:59 | 2623973 GMadScientist
GMadScientist's picture

I actually read that as "Paging Ms. Whitey" including a Samuel L. Jackson voice-over.


Tue, 07/17/2012 - 11:42 | 2624462 I am a Man I am...
I am a Man I am Forty's picture

You would have lost your ass if you listened to and bet on Meredith Whitney.  I am heavy in municipal bonds, I don't own any in CA and IL because those states are a mess.  I can assure you that if you bought a well diversified portfolio in 2007 you would have absolutely kicked ass up until right now and through the entire financial crisis.  Ms. Whitney called for 50 to 100 large failures LAST YEAR.  She WAS WRONG.  

Tax free at 5% if you bought back in 2007, not to mention the up side.

Tue, 07/17/2012 - 12:35 | 2624653 goldnguns
goldnguns's picture

concur, parked $300k in some good munis, had a water district in midwest paying over 5.75 tax free.  Now looking for another good, solid risk free parking spot - like Iranian oil, or neighborhood Spanish bank, or tourism in Egypt.

Tue, 07/17/2012 - 09:42 | 2623909 blueridgeviews
blueridgeviews's picture

Policy solutions? Come on folks, stop the pandering and start forcing gov't's to live within their means.

This whole financial crisis is pathetic and the remedies even more pathetic. Thhis isn't rocket science.

Tue, 07/17/2012 - 12:12 | 2624573 JeffB
JeffB's picture

Too bad they don't have clawback provisions for salaries & pensions for the politicians and administrators who made all of these silly promises that can't possibly be fulfilled.


Tue, 07/17/2012 - 09:42 | 2623911 zero19451945
zero19451945's picture

Default and bankruptcy need to be embraced as cleansing actions and not bad things.

Tue, 07/17/2012 - 10:57 | 2624223 No One
No One's picture

but we need to ensure that the banks are whole. There can be no risk for the masters per decree.

Tue, 07/17/2012 - 11:52 | 2624506 prodigious_idea
prodigious_idea's picture

Up-arrow if you believe the same is true for personal bankruptcy.

Tue, 07/17/2012 - 09:42 | 2623912 WatchingIgnorance
WatchingIgnorance's picture

For some reason, that song "For Whom the Bell Tolls" has come to mind.

We are just getting started bitchez! The rot is deep and has spread to the entire body. Antibiotics will no longer help.

Tue, 07/17/2012 - 09:42 | 2623914 Asher88
Asher88's picture worries

Tue, 07/17/2012 - 09:44 | 2623920 sickofthepunx
sickofthepunx's picture

unions and city managers, huh?  how about the third leg of that stool:  the pain in the ass taxpayer that would rather see their city burn to the ground because essential services are not properly staffed rather than see their taxes go up one strawpennny?

how is austerity working out for you Colorado Springs? 

Tue, 07/17/2012 - 09:50 | 2623941 Dr. No
Dr. No's picture

You do know they cut FireDept funding first so they create public opinion like yours.  As the FD is layed off, the city inspectors continue to check peoples lawn sprinklers, surveyers continue to mark old township roads which have been dirt since grandam moved in 80 years ago, but somehow think it needs to be paved now.

Tue, 07/17/2012 - 10:41 | 2624162 Gromit
Gromit's picture

And everything gets done 10 times slower (is that possible?) because they have less people to sit around and do nothing.

Tue, 07/17/2012 - 12:05 | 2624551 prodigious_idea
prodigious_idea's picture

How did that comment get 8 up-arrows?

Tue, 07/17/2012 - 09:51 | 2623943 LawsofPhysics
LawsofPhysics's picture

Unless of course organized citizens and communities just say "fuck you, we will be our own essential services".  Fuck the paper-pushers, they don't add any real fucking value anyway.

FYI- Colorado Springs is doing just fine, sometimes it's nice to be at the top of the water and food chain.  How's L.A. country gonna fair when colorado shuts the fucking water off again?  LMFAO!!!!

Tue, 07/17/2012 - 10:43 | 2624166 Gromit
Gromit's picture

LA doesn't get its water from the Colorado, doesn't need to , bought up the Owens Valley a hundred years ago.


Tue, 07/17/2012 - 13:15 | 2624828 LawsofPhysics
LawsofPhysics's picture

Arizona sure as hell does, and the Owens valley is still supplemented from the colorado (when they can).

Tue, 07/17/2012 - 09:52 | 2623944 Uncle Remus
Uncle Remus's picture

What a douche. If the city burns to the ground it's because all the money went to the retired firefighters, not the ones that used to wait at the fire station. Blackmail'll get you nowhere 'ceptin' maybe past tensed.

Tue, 07/17/2012 - 10:15 | 2624041 knightowl77
knightowl77's picture

People are firefighters and police officers because of the pensions... Why else work holidays and rush into burning buildings or places where they are shooting at you.....The pension is the only reason 80% of them stay on the job

Tue, 07/17/2012 - 10:28 | 2624103 Uncle Remus
Uncle Remus's picture

The pension is the only reason 80% of them stay on the job

That is a sad commentary in my view.

Once upon a time, in a land far far away, people did dangerous jobs because they needed to be done - you know, public service. Now we have shallow fucks, including doctors, lawyers, TV evangelists and a seemingly large preponderance of government employees that simply follow the money.

Tue, 07/17/2012 - 10:37 | 2624142 MachoMan
MachoMan's picture

I think your nostalgia is cherry picked at best.  Humanity hasn't changed...  however, our access to perversion has changed...  but to imply some inherent nobility on our predecessors is...  naive at best.  Our motivating self interest is the same motivating self interest pumping through their veins.

Tue, 07/17/2012 - 11:00 | 2624251 Uncle Remus
Uncle Remus's picture

Human behavior is what it is. The fact is public service has been performed for the sake of public service, at significant personal risk and without the carrot of a pension or negotiated compensation. It has been demonstrated time and again that the pay and pensions for some "public servants" have reached egregious levels of burden on the taxpayers and subsequent attempts to reach an accommodation have degenerated into a, ahem, default "scorched earth" policy of bankruptcy.

And we will not learn.

Tue, 07/17/2012 - 11:01 | 2624261 arby63
arby63's picture

...and worse, they QUIT on the public long before that pension rolls around. most must milk the "process" for all it's worth: avoiding any and all responsibility or active "thinking" except in the case of how to milk the system even MORE.

Tue, 07/17/2012 - 11:29 | 2624391 Nobody For President
Nobody For President's picture

As a 20+ year volunteer firefighter who has known a lot of firefighters both paid career and volunteer:

You are full of shit, and know not what you say.

Do you even KNOW any firefighters, like personally? Or cops, for that matter - worked with a bunch of highway patrol and local sherrifs over the years, and most of them, by far, are really good guys (and gals).

Yeah, their pensions are out of control - strong voter block. But there are damn few people that can put up with the load that goes with career firefighting or police work just for the pension. Check their divorce stats sometime.

The word 'service' still means something to most of these folks - unlike (say) our 'elected officials'.

Blaming the people on the line for the muni problems is exactly what TPTB keep feeding the PACs and MSM for. Know your enemy - it ain't your local firefighters, asshole.

And no - I don't receive any pension for my service - but my friends and neighbors are grateful.

Tue, 07/17/2012 - 10:01 | 2623977 mr1963
mr1963's picture

Fireman in Chicago on $91,000 per year disability in Rahm political ad. Yeah, keep giving in, see what you get...

Tue, 07/17/2012 - 10:04 | 2623997 sudzee
sudzee's picture

All public servants should be fired 1 week before retirement.

Tue, 07/17/2012 - 10:17 | 2624049 knightowl77
knightowl77's picture

Wouldn't change the pension .....the difference in service credit from 30.00 years versus 29.95 is almost nil

Tue, 07/17/2012 - 10:39 | 2624150 MachoMan
MachoMan's picture

Better suited for bankruptcy and voting with our feet.

Tue, 07/17/2012 - 10:24 | 2624083 azzhatter
azzhatter's picture

Simply- Fuck you

Tue, 07/17/2012 - 10:43 | 2624168 SubjectivObject
SubjectivObject's picture

So, sickodude, what are your counter arguements here?


Tue, 07/17/2012 - 10:59 | 2624191 Dasa Slooofoot
Dasa Slooofoot's picture

All the Fire Departments around me are volunteer.  We get along just fine. 

Just put a fully stocked bar in the firehouse and you'll get volunteers. 

Tue, 07/17/2012 - 11:09 | 2624307 quasimodo
quasimodo's picture

No shit there, same thing with EMS as well in my area. We actually give a fuck about helping people. Sure as hell ain't for da pay....we don't get a dime and spend countless hours each year on call and keeping up with training- I might add it's training decided by some fucks down in the capitol who ARE getting paid very well and don't have the first damn clue about treating folks in the field.

The way these larger cities are heading they better get a bucket brigade organized, or watch her burn to the ground bitchez!

Tue, 07/17/2012 - 11:40 | 2624445 Stuck on Zero
Stuck on Zero's picture

Austerity in San Diego means potholes never repaired, schools closing, and essential services cut.  That's all to keep paying $250,000 retirement to the lifeguards, firemen, policemen, and other worthy city workers.


Tue, 07/17/2012 - 12:02 | 2624537 prodigious_idea
prodigious_idea's picture

Pain in the ass taxpayer?  What an arrogant fuck.  We pay your salary, and benefits, and pensions, and, and, and.  I am EAGER to see bankruptcies that result in a reset to reality.  Maybe a little unemployment would transport you back to the real world.

Tue, 07/17/2012 - 14:01 | 2625017 Offthebeach
Offthebeach's picture

I have a boat. Every single second it is in the water, water tries to get through the through hulls. No tax sucking hack "assists me". Maybe dolts shouldn't live in wood sheathed, wood framed, ashaulted roofed boxes in a turpentine wooded high altitude desert.
Build your house out of concrete, blog k,brick and tile, Fenstrate with steel. Problem solved. Or not. Live in Japan lacquered paper house. Same as people who build on the water. Not my/our problem.

Tue, 07/17/2012 - 09:44 | 2623923 DanP1966
DanP1966's picture

Thinking that Gasparino and Kaminsky are gonn owe Ms. Whitney an apology.

Tue, 07/17/2012 - 09:46 | 2623928 Dr. No
Dr. No's picture

My only hope as Munis continue to fail, these failed towns will abandon their distructive property rights laws they keep coming up with which prevents land owners from using/selling their land as they see fit.

Tue, 07/17/2012 - 09:57 | 2623964 yellowsub
yellowsub's picture

Stop archiac pension plans and cut back on their cadillac health care, put them on Obamacare instead.

Teachers union especially in NJ, needs to make real concessions and lay off or force retirement of 20+ years teachers.  We can't be laying off the new generation of teachers or later on we'll have a shortgage.  They need to cap non essential teachers like shop and elementary grade art, I don't care how long you work there but no way either of them should get paid up to 6 figures for a job that can be done by anyone...

They rode the wave of the boom now ride the down wave with the rest of us and their demands are still ridiculous asking for 5% increases during these times...  

Tue, 07/17/2012 - 10:35 | 2624128 Temporalist
Temporalist's picture

Shop is not non-essential.  Here's a good read:

Tue, 07/17/2012 - 12:11 | 2624564 prodigious_idea
prodigious_idea's picture

Yep, it's been sad to see the disappearance of "shop" classes from the schools.  Certainly the 3 R's were vital, but my favorite and frequently most useful classes were drafting, woodshop and metalshop.  And thank you Boy Scouts, although I hope I never have to make a life preserver out of my Levi's while treading water in the dark.

Tue, 07/17/2012 - 12:28 | 2624620 JeffB
JeffB's picture

My wife learned to shop on her own and keeps up with her own continuing ed requirements. and then some.



Tue, 07/17/2012 - 09:52 | 2623948 Dr. Engali
Dr. Engali's picture

It's all good the politicos will be fine. The politicians will keep taxing the businesses and the people until  all the cities look like Gary Indiana. If it moves tax it.

Tue, 07/17/2012 - 10:30 | 2624113 GeezerGeek
GeezerGeek's picture

If it doesn't move, it's probably real estate. Tax it.

Tue, 07/17/2012 - 09:54 | 2623954 rsnoble
rsnoble's picture

My property taxes are about $3k a year, cheap compared to some bad enough you're talking nearly $300 a fucking month.

They don't sell tax liens here, yet, and it takes 5 years of back taxes to get your shit sold off.

I could write them a check write now(my house is paid off so it's not taken out of my mort payment) but im not going to.  I'm rolling the dice that these rotten motherfuckers will be toast in 5 years.  Yes, there's a 10% interests but I don't really care it's worth a thousand bux or so to me to be helpful in their demise.


Tue, 07/17/2012 - 10:24 | 2624088 Dr. No
Dr. No's picture

A tip of the hat.  However, I suspect some Goldman middle managment has already come up with an idea to use your back-tax bill as collateral for a muni loan somewhere.  The cards will fall, but there is a complicated web of bubble gum and twine holdign it together.

Tue, 07/17/2012 - 10:25 | 2624092 Blue Horshoe Lo...
Blue Horshoe Loves Annacott Steel's picture

If U can help kick a municipality into bankruptcy by holding on to the property tax money they want to steal from U, more power to U.  I think U should get a reward.

Tue, 07/17/2012 - 10:37 | 2624140 VisualCSharp
VisualCSharp's picture

'U' is not a word, you know.

Tue, 07/17/2012 - 10:45 | 2624175 MachoMan
MachoMan's picture

I would strongly encourage you to speak to a legal professional about your plans...  while it may take that long typically to get your house sold from a tax lien, your county will probably certify it to the state much sooner (aside from publishing your name in the local newspaper for delinquent taxes).  Certification to the state may pose other unintended consequences (the state owns the land at that point).  It's also important to realize that states often times botch the sale process and you might not even get notice until the sheriff shows up to boot you out (with court order in hand).


Tue, 07/17/2012 - 11:05 | 2624278 Hype Alert
Hype Alert's picture

My county has refused to adjust property values as prices have fallen and then I find out they are offering this program to government employees.


Let's see, we overcharge you on property tax and when you can't pay you lose your house.  The government then owns the house via tax lien or buys at a discount and then sells it to a government employee for 50%.  Seriously, what's next?

Tue, 07/17/2012 - 09:56 | 2623962 Temporalist
Temporalist's picture

Now that Uncle Bubbles said it it must be true.  Meredith who?

Buffett Says Muni Bankruptcies Set to Climb as Stigma Lifts

Tue, 07/17/2012 - 10:02 | 2623988 yellowsub
yellowsub's picture

He also says he can end the deficit in 5 minutes.

Tue, 07/17/2012 - 10:00 | 2623979 RobotTrader
RobotTrader's picture

Meredith Whitney has gained 80 lbs. the last two years while watching in horror the biggest muni-bond rally in history.


California and New York muni-bond ETF's hitting record highs again today.

Tue, 07/17/2012 - 10:32 | 2624070 John Law Lives
John Law Lives's picture

Out of curiosity, why do you keep referencing ETFs when debating the merits of owning muni bonds as an asset class?  Individual munis should be evaluated based upon the fiscal condition of the entity that issued them.  Some are more risky than others.  I personally wouldn't touch many munis issued in Cali or Illinois or NJ etc.  However, the demand for munis issued in Texas (e.g.) is incredible.  I see it every day that bonds trade.

Tue, 07/17/2012 - 10:07 | 2624009 Whats that smell
Whats that smell's picture

The old saw that city workers are the laziest bunch around is true I've seen it too much firsthand.

When the mayor or manager bargains with the union (or contractors) they have no incentive to be thrifty, it ain't their money they are spending.

Tue, 07/17/2012 - 10:27 | 2624100 azzhatter
azzhatter's picture

But think of the profits at the local donut shops

Tue, 07/17/2012 - 10:08 | 2624013 Uncle Remus
Uncle Remus's picture

Cue "Rawhide"

Rollin' rollin' rollin'

Keep them defaults rollin'


Tue, 07/17/2012 - 10:11 | 2624027 HurricaneSeason
HurricaneSeason's picture

They need to start charging prisoners for their incarceration. With interest rates so low, the federal government could give loans to the prisoners. That would help cities and prisoners too.

Tue, 07/17/2012 - 10:22 | 2624076 Blue Horshoe Lo...
Blue Horshoe Loves Annacott Steel's picture

Better solution: Stop locking people up for penny ante crimes that hurt no one.

Most people in prison are there for marijuana offenses. The Rockefeller drug laws...

Tue, 07/17/2012 - 11:00 | 2624247 HurricaneSeason
HurricaneSeason's picture

Compromise: The marijuana offenders can use part of their annual CELL grants for medical AND non-medical marijuana and video games.

Tue, 07/17/2012 - 10:14 | 2624029 jplotinus
jplotinus's picture

Municipal fiscal crisis is almost exclusively a matter of policy and of priority:

-Outsource American manufacturing
-Fail to consider need for, let alone implementation of replacement jobs.
-Allow corporate and bankstas fraud to go unpunished.

-$ billions for military industrial complex and warring.
-And, $billions for warring and military industrial complex.

If anyone is unclear as to the direct causes of municipal fiscal starvation, let me know and I will provide additional clarity.

Tue, 07/17/2012 - 10:18 | 2624040 Uncle Remus
Uncle Remus's picture

You forgot a BIG chunk of the pie homeskillet - social welfare. "Billions and billions"

Tue, 07/17/2012 - 12:55 | 2624727 goldnguns
goldnguns's picture

Let's be fair and throw in "billions" for interest payments on 15 trillion, billions flushed down the Dept of Energy,  HUD, Dept of "Edumacahsion", TARP, and oh yeah, 1.5 trillion for the "war on poverty".

Tue, 07/17/2012 - 10:20 | 2624064 Blue Horshoe Lo...
Blue Horshoe Loves Annacott Steel's picture

Helicopter Ben to the rescue with his magical digital counterfeit currency printing press!

Tue, 07/17/2012 - 10:24 | 2624078 sosoome
sosoome's picture

Well, these pie in the sky spend spend spend muni "leaders" would never listen to fiscal reason, so good...

let Mr. Market sort it out for them.

Tue, 07/17/2012 - 10:28 | 2624102 azzhatter
azzhatter's picture

Lack of leadership at every level of government. Afraid to tell the truth.

Tue, 07/17/2012 - 10:45 | 2624173 Gromit
Gromit's picture

No public service pension shoulf exceed five times minimum wage.

Tue, 07/17/2012 - 10:58 | 2624228 vote_libertaria...
vote_libertarian_party's picture

1'000s of cities and counties will have to make the tough choices shortly.


Cut employees and mostly PENSIONS or raise taxes.  In order to save their own feifdoms they will probably mostly chose the first.


The city where I live almost HALF of the budget is pensions.

Tue, 07/17/2012 - 10:59 | 2624235 nowhereman
nowhereman's picture

Once again I need to remind people that the cause of the municipal fiscal crisis stems from the billions lost to the corrupt investments the TBTF banks pawned off on municipal government investment funds.

Municipalities, including municipal pension funds, went to the banks to secure AAA investments for their portfolios.  The same occurred in the municipal bond market.  Need I say more?

It sickens me to read how posters here blame the pensioner and those on social assistance for the plight of these municipalities.

Obviously the Banks and their propagandists are very successful in steering public opinion away from the true culprits in this financial fiasco.

The niaivity of some posters here is astounding.

Tue, 07/17/2012 - 14:15 | 2625067 Offthebeach
Offthebeach's picture

Union dolts approved it. They should of given their money to their union leaders and run their own pension fund. You k know, ,trust the union label. There's plenty of places to park money then banks. Anyway their union problem, not mine.

Tue, 07/17/2012 - 11:00 | 2624252 falak pema
falak pema's picture

meredittttttthhhhh.... one moment in time....whitney! 

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