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Why are US municipalities in trouble?

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    Measuring fallout of bankruptcy issue

  • Duration 2:12
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Thank you let's dig a little deeper Melissa Francis host of money on the Fox Business Network joins us now from New York to -- in Melissa.

Hi Brett you know this seems like a big deal we have twelve cities across the country you've already that have already filed for bankruptcy some 27 by our.

Indication our records are considering it or some sort of move like how how serious is this.

It's a very serious problem and it's cascading across the country as you said because all communities are facing the same thing.

They're seeing their tax revenues go down so dramatically.

Property taxes are drying up people are going into foreclosure and they're leaving town but the same time their pension obligations.

Are changing at all they have the same number of firefighters the same number of retired teachers so the costs are staying the same are going -- -- a lot of cases.

But the revenues going down -- the gap just gets wider and wider.

Short of a bailout from the federal government.

Which is not going to happen politically in this environment.

There are only a few things cities can do.

That's right.

I mean you -- highlighting Scranton they were talking about raising property taxes 78%.

I don't know how realistic that is people can't you know double their property tax payment they can't get it died it was the federal government they would print money.

Or they would go out of float more debt to China -- local municipalities.

Can't do that.

Moody's was saying that you know they're gonna downgrade a lot of municipalities because they can see these problems comings and -- Beating them to the punch of trying to go out and borrow more money from the public.

The only option that leaves is not paying your debt and that's why a lot of areas are going into bankruptcy.

You mentioned uninteresting issue -- mean a lot of funds.

Invest in municipal bonds.

Absolutely I mean and this is something that analyst Meredith Whitney warned about awhile ago that a lot of municipalities couldn't you know not pay their debt and what would it mean.

To all of the different pension -- and everybody who owns you know and municipal bond it's really a serious problem over time and it's.

It's one that a lot of people are concerned about you have banks warning that this could be a coming Christ says.

And you're looking at towns starting to really deal with -- by going into bankruptcy is that during -- and indeed now.

Okay Melissa thank you so much.

Think you.

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