House Majority Leader: No Bankruptcy or Bailouts for States

U.S. House of Representatives Majority Leader Eric Cantor (R) said yesterday that he does not support any federal bailouts for states or allowing them to declare bankruptcy, Reuters reported yesterday. "I don't think that [bankruptcy] is necessary because state governments have at their disposal the requisite tools to address their fiscal ills," Cantor said. Last week, Newt Gingrich, the conservative Republican and former House Speaker, said that legislation was being prepared in Congress to let states declare bankruptcy -- an idea that the potential 2012 presidential candidate had been talking up. Gingrich's remarks came despite resistance from states and investors in the $2.8 trillion municipal bond market to such a move.


http://www.reuters.com/article/idUSTRE70N5T420110124


In related news, Connecticut Gov. Dannel P. Malloy (D) is ruling out any thought of Connecticut declaring bankruptcy, despite the state's deficit problems, saying that the idea is wrong-minded and would endanger the municipal bond market, the Associated Press reported yesterday. Malloy said that the marketplace for state and local bonds would disappear if states began filing for bankruptcy. Connecticut's deficit for the new fiscal year is predicted to be $3.4 billion to $3.67 billion.

http://www.bloomberg.com/news/print/2011-01-24/conn-gov-calls-state-bankruptcy-idea-crazy-talk-.html