Roubini Global Economics issued a report on Monday that theorized muni bonds were in for a fall—a big fall, to the tune of some $100 billion—over the next five years, as state and local governments default on obligations.
The report, by the financial analysis firm co-founded by Nouriel Roubini, echoes a forecast by Meredith Whitney, who predicted that the muni market would suffer broad collapse, although Roubini’s firm is not quite so pessimistic.
The Guardian reported that mutterings of “Pollyannaish" investors and “Cassandras predicting another 'sub-prime' disaster" punctuated the report by David Nowakowski and Prajakta Bhide, the report's authors, who went on to say that the problems would not be "systemic in nature" or "infect the financial system, though they will dampen economic recovery."