Local government bond issues, called "munis," are facing tough times during this credit debacle. States and Local Governments are having a hard time borrowing money. Bond issues have reportedly been delayed or cancelled that would have brought revenue to housing agencies in California, Florida, Texas and Virginia, and that would have helped to finance other projects as diverse as hospital emergency rooms and cancer centers, sewage treatment plants, and airport terminals in Montana, Georgia, and the District of Columbia, to name only a few. E.g., Marc Lifsher, "Credit Crunch Puts California Governments in a Corner" (Los Angeles Times Online, Thursday, October 2, 2008); Mary Williams Walsh, "Cities Are Cutting Back Projects" p. A1, col. 5 (New York Times Nat'l Ed., Wed., October 1, 2008).
The collapse of credit ratings for Bond Insurance Companies was the subject of many recent posts in this space. The bottom line is that Credit Rating Companies once gave such high ratings to the Bond Insurance Companies that they prospered; however, the Bond Insurance Companies ceased to prosper -- actually, they went into free fall (or freefall, as you prefer) -- shortly after they wandered far afield into the muck of a system which exalted the now-discredited Credit Default Swaps and Collateralized Debt Obligations. These adventures not only failed in their own right, but the failures brought down the once-high Credit Ratings of the Bond Insurance Companies that departed into these discredited adventures.
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