re: McConnell says he favors allowing states to declare bankruptcy

quote:

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Problem is that a lot of Mutual funds hold state and municipal bonds. If states start to bankrupt, you will see a 20% decline on the bond side. Put that with the current stock decline and people will see a 50% drop in even conservative 401Ks.

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Remember that bankruptcy does not necessarily mean liquidation or complete default, but might also include restructuring.

I can see a bankruptcy trustee NOT wanting to destroy the ability to issue desirable bonds and instead imposing cost cutting and restructuring of things like pensions.