Ok, we got through the financial crisis. We’re getting through the European crisis. Jobs are coming back. Shippers are bringing boats back onto line because they’re seeing increased trade.
BUT there’s one looming crisis, and that is the states.
According to The New York Times, Albany has just learned that state coffers are coming in $2 billion lighter than expected.
As such, in order to avoid default, the state will be delaying $500 million in income tax rebates. Governor Paterson says he “apologizes” for the inconvenience.
A question is: where are the ratings agencies pointing out the obvious, that New York State debt is hardly secure? Are they afraid of the cascade of sales from bullish muni fund managers forced to liquidate non-agency debt? Would they not be downgrading a company that suddently found itself $2 billion in the hole?