Wednesday, 22 Dec 2010 12:40 PM
By Greg Brown
Meredith Whitney, the former Oppenheimer analyst
whose dead-on predictions on the banking crisis vaulted
her to fame, stands by her controversial new call:
Massive unrest across the country as the municipal-bond
market sells off.
Whitney appeared Sunday on “60 Minutes” to predict
defaults in as many as 100 cities and towns, followed by
European-style public demonstrations as cities slash
budgets in response.
"States clearly have been funding municipal governments
— for now up to 40 percent of their total expenditures,"
she tells CNBC
"As the states become more compromised from a fiscal
standpoint, that funding is going to end."
She defended the reaction of ratings agencies and
others, who called her predictions overblown.
"I didn't put the debt on these states. We're looking at
the numbers. This is how it plays out,” she said, adding
that the federal government is also unlikely to bail out
broke states.
Hoping to get ahead of a ballooning public spending
problem, Republican New Jersey Gov. Chris Christie has
signed into law a cap on pay increases for firefighters
and police in that state when contract negotiations
break down.
Starting Jan. 1, the new law limits increases made by
arbitrators to 2 percent.
"Everyone is going to have to make tough choices,"
Christie said at the law’s signing, reported The
Star-Ledger.
"We are handing over a significant set of tools. That
doesn’t mean their choices are going to be easy, it just
means they’re going to have choices now."
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