by John Galt
July 11, 2012 05:15 ET
The third California city with financial difficulties in the last 2 weeks alone has elected to seek Chapter 9 Bankruptcy protection as San Bernandino, CA (Pop. 292,000) plans to file to avert missing the next payroll deadline for its employees on August 15th. The article covering this proposed filing from Bloomberg BusinessWeek has a very interesting quote via City Attorney James Penman however, which adds to the traditional twist of why so many communities are in dire financial straits:
Penman said during the meeting that former city employees had understated the extent of San Bernardino’s fiscal woes in “falsified” reports to the council and mayor over the past 16 years. He declined to name anyone. Mayor Patrick Morris, who took office in 2006, said it was the first time he’d heard such allegations.
Shocking (that’s sarcasm by the way).
Is it possible that there are city officials who have actually falsified records to portray city balance sheets in a better light than they actually were? It would appear so the city could maintain a better credit rating and sucker, er, sell bonds to unwitting retirees and investors. Who do they think they are, the U.S. Government?
The reality is that the fraud is widespread across the United States and as these fiscal emergencies spread like a Colorado wildfire, the Municide that I’ve been warning about for years will engulf thousands of bond issues for municipalities across the land, especially as the second wave of the housing crisis finally hits a historical long term bottom and the foreclosure tsunami cleans out the remainder of delinquencies. In the mean time, only one question remains:
I wonder if the attacks on Meredith Whitney will continue when the U.S. begins to experience a Chapter 9 bankruptcy filing for a municipality on a daily basis?