Get Ready for Great Recession, Part 2
By Rich Smith
The capital of Pennsylvania just fell into bankruptcy. What? You didn’t hear? Neither did the financial markets — yet.
Crippled by a $300 million-plus debt burden taken on to fund a municipal incinerator, Harrisburg, Pa., filed for bankruptcy protection earlier this week. According to its city council, the only alternative to bankruptcy would have been to sell off the city’s few remaining cash-generating assets — parking garages and parking meters, for example — to raise funds to pay off its creditors. Worse, once those assets were gone, the city would have been even more strapped for cash, which probably would have necessitated a bankruptcy filing “in three to five years anyway.” So rather than procrastinate, Harrisburg bit the bullet — and bit the big one.
The Shocking Reaction — Yawn
The day after news of Harrisburg’s bankruptcy broke, the Dow Jones Industrial Average (^DJI) barely trembled, while the Nasdaq (^IXIC) actually rose 0.6%.
And what about the one company that you would think would have been slammed by the news, Assured Guaranty (AGO) (whose subsidiary insured part of Harrisburg’s debt and will now almost certainly be asked to pay up in the bankruptcy proceedings)? Its stock didn’t even budge!