Now that cities are defaulting into bankruptcy, the Federal Reserve has announced that municipal bonds, normally considered one of the safest of investments, to no longer be trustworthy. Ellen Brown writes
In an inscrutable move that has alarmed state treasurers, the Federal Reserve, along with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, just changed the liquidity requirements for the nation’s largest banks. Municipal bonds, long considered safe liquid investments, have been eliminated from the list of high-quality liquid collateral. assets (HQLA). That means banks that are the largest holders of munis are liable to start dumping them in favor of the Treasuries and corporate bonds that do satisfy the requirement.
This will only exacerbate the string of city bankruptcies as they struggle with non-funded retirement accounts. Look out BELOW!