Michael Barone: Bankruptcy could help states avoid a crisis | The Columbus Dispatch

 

Investors have been selling off state and local municipal bonds. Meredith Whitney, the financial expert who first spotted Citigroup’s overexposure to mortgage-backed securities, is now predicting a sell-off in the municipal bond market.

So it’s entirely possible that some state government — California and Illinois, facing $25 billion and $15 billion deficits, are likely suspects — will be coming to Washington some time in the next two years in search of a bailout.

How to avoid this scenario? University of Pennsylvania law professor David Skeel, writing in The Weekly Standard, suggests that Congress pass a law allowing states to go bankrupt.

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