I thought junk bonds were ‘high risk – high return’ whereas I’d have thought Chicago was more ‘high risk – no return. Not so much junk bonds, just junk. Reader comment from “Mike”
It’s doubtful that Warren Buffet’s Moody’s Investor Services will face the same wrath from Obama that Obama inflicted on S&P after S&P downgraded the U.S. Government debt rating from triple-A to double-A. After all, Warren Buffet owns Obama.
The outlook on all long term ratings remains negative (LINK)
But recall that Moody’s did not downgrade Enron to junk status until Enron hit the wall. While I’m not suggesting that Chicago will hit the wall anytime in the next few weeks, it does suggest that the White House is probably evaluating bail-out ideas.
I’m not sure how Obama thinks he can smooth this one by all Federal taxpayers outside of the State of Illinois (which itself is running something like an admitted $21 billion budget deficit). But, then again, something like 45% of registered Democrats have expressed voting support for a criminal (Hillary Clinton), so anything is possible in this Orwellian paradise.
Here’s a summary of Moody’s downgrade “rationale:”
The Ba1 rating on Chicago’s GO debt incorporates expected growth in the city’s highly elevated unfunded pension liabilities. Based on the Illinois Supreme Court’s May 8 overturning of the statute that governs the State of Illinois’ (A3 negative) pensions, we believe that the city’s options for curbing growth in its own unfunded pension liabilities have narrowed considerably. Whether or not the current statutes that govern Chicago’s pension plans stand, we expect the costs of servicing Chicago’s unfunded liabilities will grow, placing significant strain on the city’s financial operations absent commensurate growth in revenue and/or reductions in other expenditures.
Our negative outlook reflects our expectation that Chicago’s credit challenges will continue, both in the near term and in the long term. Immediate credit challenges include potential draws on liquidity associated with rating triggers embedded in the city’s letters of credit (LOCs), standby bond purchase agreement (SBPA), lines of credit, direct bank loans, and swaps [Oops – banks can and should pull the plug]. The current rating actions give the counterparties of these transactions the option to immediately demand up to $2.2 billion in accelerated principal and accrued interest and associated termination fees.
Chicago, like Detroit before it, is emblematic of the Rot of Empire. Large industrial-based cities have been gutted by modern day Robber Barons who have moved the bulk of America’s industrial base to cheap-labor eastern hemisphere domains. These large Rust-Belt metropolitan areas are collapsing under the weight massive budget deficits and catastrophically underfunded public employee pension funds.
I would hazard an educated guess that if Moody’s has determined that Chicago is regarded as below investment grade, the stark reality is that Chicago is likely on the verge of collapse barring some likely smoke-filled back room deals cut between Obama and his former puppet-master, Rahm Emanuel (Mayor of Chicago).
I would bet that the United States is entering it’s Final Chapter. This is why the Obama regime has intensified its attempt at global military control both domestically (Jade Helm) and abroad.
I hope I’m wrong, but I have a bad feeling that life is going to become very uncomfortable for anyone not a member of highest elitist echelon. This would mean everyone except those in the “three-comma club” (billionaires) and the political puppets controlled by the ultra-wealthy.