Saturday, August 18, 2012

Moody's: More California Cities at Risk of Bankruptcy

Moody's Investors Service says in a report that the growing fiscal distress in many California cities is putting bondholders at risk, AP reports.

The service announced that it will undertake a wide-ranging review of municipal finances in the nation's most populous state because of what it sees as a growing threat of insolvency.

The agency also will examine the outlook for municipal bonds in other troubled states, according to Robert Kurtter, managing director of public finance at Moody's.

Moody's would not say which states it will review, though Kurtter mentioned Michigan and Nevada as possibilities.

AP warns that more than 10 percent of California cities have declared fiscal crises, according to the Moody's, with the most troubled areas lying inland in the middle of the state and east of the Los Angeles area.

And the shock could be big: Moody's floated the idea Friday of an across-the-board ratings adjustment for California cities.

Given that interest rates will eventually skyrocket anyway, there is no reason at all to own municipal bonds

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