Meredith Whitney: State Economic Crisis Is Being Ignored; Crisis on the Way
Tweet
Share
E-mail
Meredith Whitney has stated that the next real threat to the U.S. economy is the looming meltdown of state and local government, a problem which she believes is being ignored.
"The lack of transparency with the state disclosure is the worst I have ever seen," Whitney told CBS News. "Ultimately we have to use what's publicly available data and a lot of it is as old as June 2008. So that's before the financial collapse in the fall of 2008."
The state and local governments have been getting by on the billions of dollars handed out by the federal stimulus programs, but the debt is making investors on Wall Street nervous about another big bailout.
"It has tentacles as wide as anything I've seen. I think next to housing this is the single most important issue in the United States, and certainly the largest threat to the U.S. economy," Whitney said.
Whitney added that people are not paying attention to the state of the local governments, "'Cause they don't pay attention until they have to."
"There's not a doubt in my mind that you will see a spate of municipal bond defaults," Whitney predicted, which could include 50 to 100 defaults adding up to hundreds of billions worth of damage to the financial system.
"When individual investors look to people that are supposed to know better, they're patted on the head and told, 'It's not something you need to worry about.' It'll be something to worry about within the next 12 months," Whitney said.
States may have to stand on their own coming this spring when the $160 billion in federal stimulus used to prop them up runs out. The state governments may have to ask for another bailout, bu wonder if the federal government will come to the rescue this time.
"The lack of transparency with the state disclosure is the worst I have ever seen," Whitney told CBS News. "Ultimately we have to use what's publicly available data and a lot of it is as old as June 2008. So that's before the financial collapse in the fall of 2008."
The state and local governments have been getting by on the billions of dollars handed out by the federal stimulus programs, but the debt is making investors on Wall Street nervous about another big bailout.
"It has tentacles as wide as anything I've seen. I think next to housing this is the single most important issue in the United States, and certainly the largest threat to the U.S. economy," Whitney said.
Whitney added that people are not paying attention to the state of the local governments, "'Cause they don't pay attention until they have to."
"There's not a doubt in my mind that you will see a spate of municipal bond defaults," Whitney predicted, which could include 50 to 100 defaults adding up to hundreds of billions worth of damage to the financial system.
"When individual investors look to people that are supposed to know better, they're patted on the head and told, 'It's not something you need to worry about.' It'll be something to worry about within the next 12 months," Whitney said.
States may have to stand on their own coming this spring when the $160 billion in federal stimulus used to prop them up runs out. The state governments may have to ask for another bailout, bu wonder if the federal government will come to the rescue this time.
Create E-mail Alert Related Categories
Insiders' BlogRelated Entities
Meredith WhitneySign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
