too big

Are “Muni’s” the next too big to fail product. While states cannot file for bankruptcy cities can and the way many cities finance their long term debt is by selling municipal bonds (Muni’s). As more and more cities face financial difficulties it is becoming more difficult to sell these bonds. Investors are leery. Cities can file for bankruptcy under a special provision called Chapter 9. Since many cities like most states are broke or going broke they will try to sell bonds and if the market collapses the federal government will step in and buy these bonds and thus the next bail out for too big to fail. Much of the long term debt of cities is like the states in that it revolves around legacy benefits for employees, things like pensions and health insurance for retirees. As this happens more and more non public employees are going to rebel against using tax payer money to provide these benefits. There could be a revolt especially when it becomes known that public employee benefits far exceed those of private employees.