Mercury Rising 鳯女

Politics, life, and other things that matter

Whee! Puerto Rico edition

Posted by Charles II on June 29, 2015

Michael Fletcher, WaPo:

The governor of Puerto Rico has decided that the island cannot pay back more than $70 billion in debt, setting up an unprecedented financial crisis that could rock the municipal bond market and lead to higher borrowing costs for governments across the United States.

Puerto Rico’s move could roil financial markets already dealing with the turmoil of the renewed debt crisis in Greece. It also raises questions about the once-staid municipal bond market, which states and cities count on to pay upfront costs for public improvements such as roads, parks and hospitals.

For many years, those bonds were considered safe investments — but those assumptions have been shifting in recent years as a small but steady string of U.S. municipalities, including Detroit, as well as Stockton and Vallejo in California, have tumbled into bankruptcy.

At one point in 2013, an estimated three out of four municipal bond mutual funds held Puerto Rican bonds, which were attractive because of their high yields and exemption from federal, state and local taxes.

Greeks close banks, probably on their way to the Grexit.

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