Buffett Expects ‘Terrible Problem’ for Municipal Debt

06-04-2010 • Bloomberg.com

Local governments rely on the $2.8 trillion municipal bond market to raise money for construction projects and fund other budget items. The financial crisis and recession battered governments across the U.S. by cutting into tax collections and causing pension-fund losses. Some governments failed to set aside enough money to cover retirement benefits promised to employees, which may place increasing strain on public finance. Rescue for Governments? Buffett said last month that the U.S. may feel compelled to rescue a state facing default after the government committed $700 billion to bail out financial firms and automakers. “It would be hard in the end for the federal government to turn away a state having extreme financial difficulty when they’ve gone to General Motors and other entities and saved them,” Buffett told shareholders in Omaha, Nebraska, at Berkshire’s May 1 annual meeting. “I don’t know how you would tell a state you’re going to stiff-arm them with all the bailouts of corporations.”

1 Comments in Response to Buffett Expects ‘Terrible Problem’ for Municipal Debt

Comment by Justen Robertson

Entered on: 6/5/2010 1:05:08 PM

I loved the character of Chigurh in No Country for Old Men as a metaphor for inevitability, great choice of image. It's very appropriate - we are not dealing with a villain here, but rather a force of nature, just as in the book/film.

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