The Scary Future of Municipal Bankruptcy - California Leads the Way
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For years, bankers have used municipal bonds from California and elsewhere as playthings. Wall Street has consistently helped elected officials mask budgetary problems with complex derivatives that create the appearance of cash flow today by selling years of future revenue. The only purpose for these securities is to deceive the public and create fees for the financial firms.
Financial chicanery in these realms is demoralizing, harmful, expensive and dangerous. California experienced this type of treachery firsthand in the 1990s when Orange County declared bankruptcy after being sold highly risky securities by Merrill Lynch. That's why it's important to listen to the Vocker-Ravitch task force's call for reforming budgetary systems in the states to make them accountable and transparent and expose financial scams to deter their widespread use. The people of California have a right to know how their fiscal accounts are managed.
Originally appeared in the LA Times.