Bond Crisis Already Crimping States

Source: Daniel C. Vock, Stateline.org, February 15, 2008

Michigan just suspended a state loan program for 8,500 students, and the Port Authority of New York and New Jersey is facing a four-fold jump in interest rates on one of its loans. Both are signs of a new bond-market crisis that is threatening to hurt other cities and states if left unchecked.

Hopes are riding high that famed investor Warren Buffett, the administration of New York Gov. Eliot Spitzer (D), Congress or federal agencies will avert even bigger troubles.

If not, cities and states that issue tax-exempt bonds to raise money for such projects as road and bridge work or rely on investors to raise student-loan money could confront a series of new problems stemming from the subprime mortgage meltdown.

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