"Market Conditions" = The States Are Broke

01-14-2011 • Market-ticker.org

New Jersey had to pull a bond auction yesterday..... that's an unusual thing. Why? (Bloomberg) - New Jersey Gov. Chris Christie has learned that talking about state insolvency may have a cost. About 20 minutes after Mr. Christie, 48, told a town-hall meeting in Paramus, N.J., today that health care costs “will bankrupt” the state, the New Jersey Economic Development Authority cut its tax-exempt school-related bond offering by more than half to $712.3 million. Oh, you mean we should just not talk about state insolvency? The solution to being insolvent is to lie about being insolvent? There's a principle in the law called theft by conversion. There's also quite a bit of black-letter law that makes it illegal to lie on a loan application. When you sell bonds, you're borrowing money. If you intentionally and falsely misrepresent your solvency, either by omission or commission, what is that, exactly, in reference to existing law? Not only is it securities fraud, it's a clear lie on a loan application, right? Well, yeah. And while the law is drawn only to count written loan documents, one can certainly argue that an offering of a bond is a "written" document and further, a bond offering is an explicit attempt to borrow money. “Mr. Christie made a rookie mistake,” Mr. Pietronico said. “The market is very sensitive to the word ‘bankrupt.'” Oh really? Mr. Christie told the truth and this is a "rookie mistake"?