I have, at best, a marginal understanding of the varied sources cities tap to fund services, expand infrastructure, etc, but it appears the municipal bond market was another overly clever Wall Street “product”, making money where none existed. (See “Big Shitpile”)
Analysts said the dysfunction in the municipal bond markets appeared to signal the end of an era of relatively cheap money for governments and, probably, the start of an era of tough choices for communities. When the market starts moving again, they said, it will look a lot like the municipal bond market of 10 years ago, before the arrival of financial wizardry in the form of structured-finance products, which lowered borrowing costs but added big new risks. […]
Municipalities will probably be able to function, but may not expand services, said John V. Miller, chief investment officer at Nuveen Asset Management, a municipal bond investment firm. “For some, the level of service they provide will decline.”
Some governments, already straining to balance their budgets, will have to cut payrolls, he said, and others may decide to raise taxes. […]
Looks like the beginnings of some un-fun times for American cities, and quite a challenge for our next President. Going to be interesting times…
