Municipalities and businesses alike are beginning to take it on the chin thanks to the sub-prime melt down. Its seems as if everyone was looking for a short cut. The market for auction-rate securities has plunged like Brittany Spears' underwear. The District of Columbia is now paying an additional $1.2 million a month to cover the interest on these securities they sold to cover the cost of building Nationals Stadium. I wonder what that foreclosure will look like. Its not just poor relation municipalities taking in the back pocket either. Hospitals, universities and even the NY/NJ Port Authority are neck deep in these cut rate debt obligations. Apparently, nobody thought the rates would go up or that the market for them would go to hell.
Granted, I can only say that I thought that housing prices would have to collapse sooner or later, I can't lay claim to seeing anything further than that. Although Nouriel Roubini probably did, but nobody listened to him. He was the biggest bear, caught in the middle of the biggest bull market anybody, anywhere has ever seen. I think its safe to say the cascade will be far reaching and perhaps worse than anyone could imagine. Public works will grind to a halt as politicians look for ways to stretch their shrinking tax base to cover rapidly growing interest payments. Universities will be forced to make tough decisions on staffing, up keep on their physical plant and quality of their programs.
The question on the tip of everyone's tongue is when will the end come, and the undeniable answer is no time soon. Certianly not while nood-nick, know nothing Senators like Christopher Dodd keep trying to meddle in markets which they know nothing about and aren't qualifed to be making adjustments to. At this time, the most prudent course of action has to be one of inaction, for any move made right now, is likely to only prolong the markets finding a proper equilibrium. Our check is coming and its going to be a big one. Putting it off only makes it worse.