Next Step—Junk

Fitch has cut Chicago’s credit rating two steps to the lowest investment grade. From the Tribune:

Chicago had its credit rating cut to the lowest investment grade by Fitch Ratings after the Illinois Supreme Court tossed out Mayor Rahm Emanuel’s plan for dealing with the mounting debt to its workers’ pension plans.

The two-step downgrade on Monday to BBB-, one rank above junk, affected $9.8 billion of general-obligation bonds and $486 million of debt backed by sales taxes. The company said the outlook is negative, indicating that the rating could be lowered further.

It can’t go much lower. The consequence of this downgrade is that the city is going to pay more to borrow going forward. Let’s see. Declining population, increasing costs, higher cost of borrowing, not much left in the way of strategies for cutting costs.

Chicago is paying the price for years, decades worth of bad decisions.

4 comments… add one
  • jan Link

    ….and who is going to have the courage and fortitude to turn those bad decisions around? The democrat party who has been in charge for years and years?

  • walt moffett Link

    With the self destructive, it generally most effective to offer help only when they have crashed so hard they know they’ve crashed.

  • Guarneri Link

    However, as we have seen, these things take a long time to finally precipitate a crisis. I have no doubt that all the pols participating in this malfeasance figure they will be long gone when that occurs. Even if not, they can point the finger elsewhere knowing that the electorate will dutifully line up in partisan fashion. After all, the real problem is not enough taxes, right?

  • michael reynolds Link

    It’s like watching a compulsive gambler who is already into his bookie for ten large, and is already hiding from a loan shark’s knee-breakers over an even bigger loan, but is still desperately marking up the Daily Racing Form and betting on long shots.

    Here would be my move, if I were Rahm Emmanuel. Leave town. Claim you’re going into rehab, but in reality head to the Costa del Sol (nothing but Brits there, no Chicagoans,) find a nice bar overlooking the Med, eat some tapas, drink some sangria. Then, after a while come back all “cured” and contrite, strike a book deal, resign from office and let the next poor dumb bastard deal with it.

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