Well, some good news for municipalities, Stnadard and Poors (S&P) has upgraded their debt significantly, which should lower their borrowing costs.

This is not a recognition of economic changes, after there is no one who is safer to loan to than they were a year ago, and the municipalities in question have seen the basic metric of credit worthiness, things like “unreserved general fund balance” and “debt per capita” have actually headed in the wrong direction.

What has happened is two things:

• The monoliner insurance companies who used to rent their credit ratings to municipalities, at taxpayer expense, are effectively defunct.
• People have noticed that government bonds have been routinely rated lower than commercial ones based on the same criteria, and are looking at investigations and/or regulations of the ratings agencies.

What has been going on for years is that the ratings agencies have systematically underrated state and municipal debt, because it’s how their buddies with the monoliner insurers got business.

It’s why I suggest that the current financial system may need to be amputated.