Listening to Lynn Jimenez last night on the radio, she doesn't think that any states will ever declare bankruptcy because their bonds are backed by their taxpayers. They have a very large pool of money to draw from to pay their obligations. I suppose that can continue until taxpayers refuse to pay state taxes any more, which is not likely to happen.
I would agree and I think the Fed is very much aware of the additional negative impact this would have on the fragile economy. It is,however, one of the many factors that makes me very bearish at the moment.