Meredith Whitney: Massive Bond Defaults Coming

from Newsmax' MoneyNews.com:

Meredith Whitney, the former Oppenheimer analyst whose dead-on predictions on the banking crisis vaulted her to fame, stands by her controversial new call: Massive unrest across the country as the municipal-bond market sells off.

Whitney appeared Sunday on “60 Minutes” to predict defaults in as many as 100 cities and towns, followed by European-style public demonstrations as cities slash budgets in response.

"States clearly have been funding municipal governments — for now up to 40 percent of their total expenditures," she tells CNBC

"As the states become more compromised from a fiscal standpoint, that funding is going to end."

She defended the reaction of ratings agencies and others, who called her predictions overblown.

"I didn't put the debt on these states. We're looking at the numbers. This is how it plays out,” she said, adding that the federal government is also unlikely to bail out broke states.

Hoping to get ahead of a ballooning public spending problem, Republican New Jersey Gov. Chris Christie has signed into law a cap on pay increases for firefighters and police in that state when contract negotiations break down.

Starting Jan. 1, the new law limits increases made by arbitrators to 2 percent.

"Everyone is going to have to make tough choices," Christie said at the law’s signing, reported The Star-Ledger.

"We are handing over a significant set of tools. That doesn’t mean their choices are going to be easy, it just means they’re going to have choices now."

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