Collapsing Banks & Bankrupt Cities

Collapsing Banks

BANKS ARE FAILING

For decades, fragile banks have been part of the cracks in our financial system. Several factors such as non-performing loans, increasing liabilities, and borrower risk profiles have contributed to periods of instability within parts of the banking sector. From 2000 to 2007, only 28 banks failed. However, since the subprime mortgage meltdown in 2008, over 500 banks have failed. 

While banking practices have drawn criticism from some, banks remain a foundational component of the U.S. financial system. Borrowing and lending activities play a central role in supporting liquidity and economic growth in the broader monetary system.

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Bankrupt U.S. Cities

MUNICIPAL BANKRUPTCIES ARE NOTHING NEW

U.S. cities have filed for bankruptcy in the past due to isolated events like lawsuits or local catastrophes (earthquakes, floods, tornados.). In 2012, several U.S. municipalities filed for bankruptcy amid challenging economic conditions. Some of the noteworthy filings include municipalities with a population of at least 300,000 like Detroit, Stockton, CA and Jefferson County, Al. These three municipalities combined for an alarming debt burden of $25 billion dollars.

In past municipal bankruptcies, cost-cutting measures have included changes to public worker pensions and reductions in city services such as sanitation, public safety, and infrastructure maintenance. Some municipalities have responded to financial strain by adjusting local tax rates to help close budget gaps. The post-pandemic economy has put pressure on municipal budgets, with some cities facing challenges in maintaining funding for public services such as education and infrastructure.1

1. https://news.bloomberglaw.com/daily-labor-report/states-and-cities-crippled-by-pandemic-push-for-next-bailout?context=article-related