Renowned Banking Analyst Predicts Gloom and Doom for Illinois

by Ashley Muchow Meredith Whitney, former banking analyst, and current CEO of Meredith Whitney Advisory Group, doesn’t see anything short of fiscal ruin for a handful of U.S. states. In a Bloomberg interview, Whitney holds up states as the new systemic risks to the U.S. economy.  Her company’s latest report, appropriately titled “Tragedy of the Commons”,...

by Ashley Muchow

Meredith Whitney, former banking analyst, and current CEO of Meredith Whitney Advisory Group, doesn’t see anything short of fiscal ruin for a handful of U.S. states.

In a Bloomberg interview, Whitney holds up states as the new systemic risks to the U.S. economy.  Her company’s latest report, appropriately titled “Tragedy of the Commons”, looks at the fiscal health of the 15 largest states measured by gross domestic product.  Whitney and her colleagues took two years to compile the 600-page report evaluating the fiscal condition of the 15 states and ranking each according to economy, fiscal health, housing, and taxes.

Where does Illinois stand on this list?  2nd worst, behind only California—tied with Ohio and New Jersey.

According to the Bloomberg article, states “bridged the gap by using federal aid, raiding their pension funds or by borrowing.”

Yes, yes, and yes.  Illinois has spent more than it has taken in, used federal funds to feed funding “shortages”, raided its pension funds, and recklessly borrowed to artificially balance a budget that has gotten progressively worse.

Investing in our state has become more and more risky; hence our cost of borrowing has skyrocketed.  Whitney predicts the need for a federal bailout within the next 12 months.  Warren Buffett shares her opinion.

Wall Street ran itself off a cliff when most every big bank gambled with investor funds and didn’t maintain a safety net to prevent pervasive financial disaster.  Unfortunately, Illinois has committed the same injustice using taxpayer dollars.  Alas, it is not improbable that our fine state may run into the same dead end or off the same cliff as these big banks.  You decide the analogy.