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The New York Times has just reported that powerful lawmakers in Congress are working behind the scenes to help states to get out from under massive debts — including obligations to pay pensions — simply by declaring BANKRUPTCY!
Even Newt Gingrich, a possible Republican presidential candidate in 2012, endorsed the idea! He says that he hopes …
“House Republicans are going to move a bill in the first month or so of their tenure to create a venue for state bankruptcy.”
Unlike cities, U.S. states cannot currently seek protection from creditors in federal bankruptcy court. But lawmakers worry that some states are so deeply buried in debt that it’s only a matter of time before their only recourse will be to demand bailouts from the federal government.
So the plan is to change the law to let them go bankrupt! In a bankruptcy, the states could:
* Renege on contractual promises to pensioners
* Stiff unsecured creditors
* Default on principal and interest payments to bond holders.
Indeed, according to The New York Times,
“Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors.”
This is TRULY a bombshell — so hot, explosive, and so potentially damaging to investor confidence that any talk about has been strictly hush-hush. The Times continues:
“Congress [is] going about their work on tiptoe. No draft bill is in circulation yet and no member of Congress has come forward as a sponsor.”
The reason, admits the Times, is simple: Everyone’s afraid that mere mention of the words “state bankruptcy” could wreak havoc in the muni bond market.
Darn right it will! They’re talking about trusted GOVERNMENTS declaring bankruptcy — an event that could do unquantifiable damage to investor confidence in all governments!
Meanwhile, the mere possibility of defaults has caused jittery investors to withdraw more than $25 billion from mutual funds that invest in muni bonds in the last two months — $4 billion in the latest week alone.
That means the cost of borrowing is already rising dramatically for states, counties and cities, a fact that can only intensify their budgetary problems. Should the market get spooked by talk of state bankruptcies or an actual default, troubled states could get priced out of the capital markets, making it impossible to borrow.
Former Obama administration budget director Peter Orszag sums it up this way:
“America must brace itself for
turbulence due to this great debt crisis.
The reason for his warning — issued just hours ago — is quite simple: He fears that …
A massive federal and state debt
implosion will probably occur before
Congress or the states act to reduce deficits!
Now do you see how urgent it is to get answers to protect your wealth — and keep it growing — through this crisis?
And now do you see why I’ve been inviting you to America’s Day of Reckoning?
Right off the bat at this timely briefing, we’ll name the
- 11 states most vulnerable to financial disaster, and
- 26 large tax-exempt bond issuers most likely to default this year.
Then, my team and I will answer the most critical questions our readers have asked us on my personal blog:
- “How can the current stock market rally last with all the cities on the brink of bankruptcy? What are your projections?” — Richard K.
- “In light of all these negative comments, how will gold perform in 2011?” — Burton R.
- “What about silver? What can we do with silver?” — Tim S.
- “For those with significant money in retirement accounts, what can be done?” — FBL
- “What will happen to the real estate you own if the financial sector crashes?” — Steve
Plus, we’ll also NAME the specific investments
we’re counting on to not only PROTECT your wealth,
but also to MULTIPLY IT as this crisis unfolds!
Look: This government debt crisis is real. As New Jersey Governor Chris Christie told 60 Minutes recently, the Day of Reckoning is here. There is no ignoring it or delaying it.
When the first domino falls, it will have major ramifications for every investment in your portfolio and every dollar you own.
That’s why I believe it is absolutely critical that you do NOT miss this critical online event!
THE EVENT: America’s Day of Reckoning in 2011
THE DATE: Wednesday, January 26, 2011
THE TIME: 12:00 Noon Eastern Time
THE VENUE: Online video teleconference
THE PRICE: Zero
This briefing is complimentary
for all of our readers.
All we ask is that you reserve your place
NO LATER than NEXT Tuesday, January 25.
Good luck and God bless!
Martin
Dr. Weiss founded Weiss Research in 1971 and has dedicated his entire career to helping millions of average investors find truly safe havens and investments. He is Chairman of the Weiss Group, which includes Weiss Research and Weiss Ratings, the nation’s leading independent rating agency accepting no fees from rated companies. His last three books have all been New York Times Bestsellers and his most recent title is The Ultimate Money Guide for Bubbles, Busts, Recession and Depression.
