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Moody’s Warns of Mass California Municipal Bankruptcies

August 19, 2012
Chriss W. Street

The klaxon horn went off for California municipal bondholders when Moody’s credit rating service issued a report stating that the plummeting financial condition of many California counties, cities, school districts and other government agencies will soon result in large numbers of municipal bankruptcy filings.

Concerned about their own potential liability for providing high ratings that encouraged conservative elderly Americans to invest in risky bonds; Moody’s announced they will undertake a wide-ranging review of municipal finances because of the growing insolvencies.

The Moody’s report comes just two days after we reported California’s sales tax revenue nose-diving by over 33%. Stockbrokers have often recommended California municipal bonds as very safe investments, due to historically low default rates and relatively stable finances. But Moody’s said that outlook is changing after the Chapter 9 Bankruptcy filings of Stockton, San Bernardino, and Mammoth Lakes.

And now… the rest of the story. …..

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