17 July 2013

There's No Crying in Munis

Several of my posts on the state of municipal finance have pointed to the unsustainable burden of public employees pensions and other retirement benefits (here and here, for example). In the interests of fair play, let me point to some bondholder whining here.

The folks at Thornberg Investment Management express the concern of the municipal bond industry generally that bondholders take no less of a haircut than retirees. While I think Thornberg's position is fair, I suspect they weren't crying foul when Rhode Island at the last minute passed a statute make all municipal bonds secured by a lien and thus not subject to any reduction in payment. The bondholders in the bankruptcy of Central Falls thus got paid in full while pensioners received only 55% of their claims.

Fairness seems to be in the eye of the beholder. Let's see how fair Stockton's plan is.

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