According to a Reuters article, former House speaker Newt Gingrich is saying that legislation to allow states to declare bankruptcy will soon be introduced in Congress. The evident purpose is, not to stiff the banks, but to allow state governments to renege on their obligations to pension funds. Some excerpts below.–t.h.g.
But the legislation will likely face an uphill battle with Democrats still in control of the Senate and the White House.
Because states are sovereign, they cannot declare bankruptcy as cities can, and most have provisions in their constitutions that make defaulting on debt next to impossible.
And California — a state which Gingrich said would likely turn to Congress for financial help along with New York and Illinois — said on Friday it has no interest in using bankruptcy to solve its fiscal problems.
Read more here.