California city ready to declare bankruptcy
This is interesting. The recession has barely gotten started, and yet Vallejo, a medium sized city in the San Francisco Bay Area, is close to declaring bankruptcy. The problems Vallejo is dealing with are similar to problems being faced by almost all cities in California, so you have to wonder if there could be a cascading effect if/when this recession gets deeper.
From today's San Francisco Chronicle:
Officials were expected to meet Tuesday night to discuss Vallejo's financial crisis that has it edging closer to declaring bankruptcy.
Labor talks aimed at keeping Vallejo solvent broke down Monday, and top administrators recommended the City Council file for bankruptcy protection.
Vallejo, a former Navy town northeast of San Francisco, faces a $6 million shortfall and officials say it will run out of money by the end of March. Chapter 9 bankruptcy would allow Vallejo temporary protection from creditors while a plan, subject to court approval, is devised to regain fiscal stability.
Will the Federal Reserves policy of inflating at all costs to keep the economy moving help California avert a bankruptcy disaster as city after city files bankruptcy? And what will happen to the credit crunch if a large number of cities stop paying their lenders back?
