Cate Long: Muniland, the Happiest Place on Earth?
Welcome to Capital Account. Municipal bonds, traditionally seen as a safe investment, were the basis of Meredith Whitney's crisis warnings in 2010. She predicted hundreds of billions of dollars in defaults, telling CBS’s 60 Minutes “there is not a doubt in my mind that you will see a spate of municipal bond defaults… fifty to one hundred sizable defaults. This will amount to hundreds of billions of dollars’ worth of defaults… it will be something to worry about within the next twelve months.” Yet her predictions failed to play out the following year. In turn, we have seen a spate of headlines proclaiming “Meredith Whitney Muni Call Was 100% Wrong.” However, between 2010 and now, we have seen cities and counties run into trouble and in some cases file for bankruptcy, including San Bernadino and Mammoth Lakes (California), Central Falls (Rhode Island), and Jefferson County (Alabama). A few others cities have filed for bankruptcy but had their claims rejected. So is there a dark underbelly lurking in Muniland? And how might the fiscal cliff impact this $3.7 trillion dollar market? We talk to Cate Long about what is really going on in Muniland.