Rick Bookstaber

The municipal bond market displays many of the problems that plagued the mortgage market leading up to the recent financial crisis. Just as homeowners took their income and locked it up via secondary loans, much of the tax base for municipalities is already mortgaged through the sale of tax-related revenue streams such as tolls and parking fees. And once a few municipalities default, there is risk of a widespread cascade in defaults because the taboo against bankruptcy will diminish, especially if there is a taxpayer revolt.