Analyst Meredith Whitney sent tremors through the sleepy municipal bond market last December when she told
60 Minutes she expected hundreds of billions of dollars worth of defaults in city and state bonds. She guessed there might be 50 to 100 sizable defaults, many occurring "within the next twelve months." And because she spotted trouble early on Wall Street during the last crisis, her words were closely followed. Borrowing costs shot up for cities. Municipal bond funds experienced record outflows. And investors waited for a day of reckoning.
A year later, they're still waiting. Standard & Poor's said muni defaults amounted to less than $1 billion this year, far less than even the 2010 figure. And while 2012 is anyone's guess, so far no one else is predicting hundreds of billions of dollars in defaults. Whitney has predictably taken a drubbing in the press. She hasn't publicly released an update to her thesis.
NEXT: Recovery in bank stocks
