The JPMorgan CEO said he expects to see more U.S. municipalities declare bankruptcy, Bloomberg News reports. His concerns echo those of Meredith Whitney, the analyst who has said the next major financial crisis will come from a wave of local government defaults, and those of famed investor Warren Buffett, who has called the municipal debt situation a "terrible problem."
"If you are an investor in municipals you should be very, very careful," Dimon said, according to Bloomberg.
His warning comes as local governments contend with painfully depreciated tax revenue, which in some cases threatens to ruin budgets. In the wake of the worst financial crisis since the Depression, cities and states have had to severely cut back their spending, even as the need for their services has grown. While official bankruptcy remains rare (Vallejo, California, is the most recent example), experts say there's trouble brewing.
Different cities have different problems, but one thing remains constant: there's not enough money coming in. Often, revenue isn't enough to cover even the most basic of services.
I wonder if Dimon's volunteering to have his company pay more taxes to keep that from happening. Somehow I doubt it. Shame that banks are too big not to bail out but your local police department isn't...
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