Foreclosures, A Major Factor in Stockton Bankruptcy

Jul 27, 2012 by

Foreclosures, A Major Factor in Stockton Bankruptcy

This Op-Ed article by Harold Meyerson of The Los Angeles Times does an excellent job of looking at the impact of the wave of foreclosures in low-income communities in causing cities to file for bankruptcy.  The article focuses specifically on San Bernardino and Stockton, two cities that were targeting by predatory lending practices during the housing boom.

When home values dropped, the real property tax revenues fell drastically.  When combined with falling retail sales tax revenues, these two cities were left unable to fund their basic municipal programs.

Another problem faced by cities is the serious drop in value of their employee retirement plans.  Many California cities participate in CalPERS (California Public Employee Retirement System).  CalPRES invested unwisely and heavily in risky sub-prime mortgage-backed securities during the housing bubble.  The full extent of their losses is still not known since foreclosures have stalled during the last year or two.

 

Read the full article: The Los Angeles Times

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