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Getting Ready For Bailing Out The States And Cities

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By Douglas A. McIntyre Published
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Experts keep saying that there is only so much bailout money to go around. That going around is getting bigger as states and municipalities try to figure out what to do as their tax revenues fall apart and the credit markets get so tight that they have to pay exorbitant interest rates for bond issues.

Several states including California, Florida, and Michigan have already hit the tipping point. It is likely that they will begin to cut essential services if they cannot come up with more cash.

According to Reuters, "U.S. states and local governments are heading into dangerous territory as a strained municipal market forces them to delay deals while fund managers worry that a lasting recession may lead to defaults."

States can’t print money for their obligations like the US government can. That gets to the heart of the matter. The federal system can either take on critical programs for schools, infrastructure, and social assistance or it can loan states and municipalities money which they are unlikely to be able to pay back for years. That is very different from banks or car companies. A state in receivership is a state which may be unable to educate its population or support the jobless and the homeless.

The amount of money Congress will need to salvage the local government system is likely to be in the tens of billions of dollars. And, its money at real risk, which is why no one wants to buy municipal bonds.

Douglas A. McIntyre

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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