Alabama County To File Largest Ever Muni Bankruptcy
Commissioners in Jefferson County, Alabama voted today to file the largest U.S. municipal bankruptcy after failing to reach a deal with bondholders. JPMorgan Chase & Co. financed most of the debt to fund a sewer renovation will probably take the biggest loss. Around $3.14 billion of bonds are outstanding.
The commissioners stood up for their constituents when they bucked the banks by not imposing as much as an 8.2% increase in sewer-rates. Alabama's most populous county passes the notorious record formerly held by California's Orange County in 1994. Fears will likely rise in Wall Street over the $2.9 trillion of U.S. municipal bonds that are outstanding.
This pending bankruptcy has cast a shadow over the county and Alabama's largest city, Birmingham. The allegedly corrupt sewer project would have meant residents would pay for the skyrocketing fees for the outstanding debt. The Jefferson bankruptcy will be the eleventh municipal bankruptcy this year.
The corruption stems from two JPMorgan bankers who allegedly made $8 million in undisclosed payments to friends of commissioners to secure the bank's role in the financing of the project. In 2009, JPMorgan settled with the Securities and Exchange Commission for $722 million.
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