NEW JERSEY BOND RATINGS FALL

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THE NEXT WAVE: MUNICIPAL BOND RATINGS AND DEFAULTS

EDITOR’S NOTE: With heads stuck in the sand, avoiding the “third rail” of acknowledgment that tens of trillions of dollars of mortgage transactions are fatally defective, which would save or partially save the budgets of most states, counties and cities, New Jersey took it on the chin with a downgrade in the announced quality of their bonds. This from the rating agencies that told the states,, counties, cities and investors that CDOs were AAA rated (virtually risk free).

Meanwhile the spin machine is running full time reminding readers and listeners that bankruptcy is not an option under current law for government entities. Of course they avoid the obvious — the legal remedy of bankruptcy has nothing to do with the factual reality of BEING bankrupt.

As the stimulus money runs out, the downgrading will reach a roar, and while the SEC searches around for alternatives to the current rating agencies, we will still be marching to the tune of S&P, Moody’s, and Fitch. Defaults seem inevitable but anyone who says so is verbally beaten to death. We like to wait for our disasters to strike before we do anything about them.

The facts are simple: government is running out of money and prospects. People don’t have enough money as it is, so raising taxes is not going to produce more revenue. We’re not training our workers to function in the modern economy, so the prospect of greater commerce or revenues to tax are also pretty dim. Past commitments for pensions and other forms of safety nets are getting expensive because the governments are not producing the tax revenue that was projected when those commitments were made.

The ONE place where the money can be located, the one source of tax revenue that is owed but both unpaid and unreported (Wall Street) is off limits. The simple admission of the scheme — that the mortgages, notes, loans, obligations and receivables generated by the holographic image of a financial structure that was never intended to be real — would produce substantial revenue, and allow for substantial recovery of losses taken by governments when they too bought mortgage backed securities that did not exist in form or substance.

It isn’t a magic bullet. But it would make the crisis aspect of our situation go away and return wealth to where it was stolen from — the middle class and poor. It isn’t the whole solution. But reality has a way of coming around to bite you. China is now positioning itself to have its own currency creep into the world markets as the world’s reserve currency. I don’t know if they will be successful (the idea that China is infallible has been bandied about without merit), but I DO know that central bankers, and commercial bankers around the world do not trust Wall Street, do not trust the the American government to do anything except protect Wall Street and do not trust the U.S. dollar.

If we lose our position in the world currency market, people should take notice. we will have a shellacking that will dwarf the 2010 elections. Financially, we are on the precipice of a looming crisis that far exceeds the scope of the Great Recession and thus threatens to compete with the Great Depression. While the White House and Congress continue to take their regulatory advice from the people who created this mess, the Court systems are getting the hang of it, and the remedy is coming faster and faster for most people, if they can hang on. The fraud might be addressed in large scope, but through the Court system, it may come too late to help us retain our market position in the world.

Costs Soaring, New Jersey Bond Rating Is Lowered

By RICHARD PÉREZ-PEÑA

NY Times

A top credit-rating firm lowered New Jersey’s bond rating on Wednesday, citing ballooning pension and other costs, and Gov. Chris Christie and Democrats in the Legislature wasted no time in blaming each other.

The firm, Standard & Poor’s, downgraded New Jersey’s general-obligation rating to AA-, from AA, and dropped the ratings on some other state debts even lower. The changes will increase the interest rates that the state must pay when it borrows money.

Standard & Poor’s has given lower ratings to just two states, California and Illinois; four others stand with New Jersey at AA-, which is the fourth-highest rating. The firm rates New York and Connecticut a notch higher, at AA.

A Standard & Poor’s credit analyst, Jeffrey Panger, cited New Jersey’s underfinanced pension and employee benefit funds, and his firm’s shift to putting more emphasis on such obligations.

The state reported last year that its pension system had $54 billion less than it needed to meet future obligations, one of the biggest such deficits in the country, and experts have said the state could run out of money within a decade. The fund for retiree health care is even further behind.

Year after year, lawmakers have failed to contribute what actuarial rules said was required to make the systems whole, increasing the size of the payment that the rules required the following year. In 2010, Mr. Christie’s first year as governor, the state was supposed to put $3 billion into the pension system, but in grappling with a large budget deficit, it contributed nothing.

The governor, a Republican, has said the state needs to curb government employee pensions and benefits to remain solvent, and at a public forum in Union City on Wednesday, he said the Democrats, who control the Legislature, had compared him to Chicken Little. “The sky started to fall in today,” he said, referring to the Standard & Poor’s action.

Such talk brought the governor criticism last month, when he mused publicly about the prospect, however distant, of a state bankruptcy — at a time when the state was marketing a new bond issue. Some bankers said he had spooked the market and possibly raised the state’s cost of borrowing by saying what chief executives usually refused to acknowledge.

Democrats said Wednesday that the governor was responsible for the downgrade, for failing to put money into pensions last year. They noted that last year they agreed to pension and benefit reductions for newly hired employees.

“It’s time the governor took responsibility for his own actions and stopped trying to blame others,” said Assemblyman Louis D. Greenwald, chairman of the budget committee.

2 Responses

  1. Let them fall too….

  2. RE: Muni-Bonds

    See CDR Indictment here:
    US District Court – Southern District of New York

    Conspiracy, Wire-Fraud, Fraudulent Bank Transactions, etc (all the good stuff)!

    United States of America v.
    Rubin/Chambers, Dunhill Insurance Services, Inc.
    d/b/a Chambers, Dunhill, Rubin & Co and CDR Financial Products, Inc (et al)

    http://www.justice.gov/atr/cases/f251600/251679.htm

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