Municipal credit is dragging down tax exempt issues. The recent bankruptcy of Jefferson County, Ala.; Detroit; Harrisburg, Pa.; Central Falls, R.I.; and Vallejo, San Bernardino and Stockton in California, has tarnished the reputation of all tax exempt issuers. In addition the fate of more than $70 billion that creditors have lent to Puerto Rico is currently in doubt.
These difficulties of public issuers have raised tax exempt bond rates and have brought to light questions regarding credit ratings of all tax exempt bond issues. The result has been more scrutiny of tax exempt issuers and more restrictions and added collateral for tax exempt issues.
A more thorough discussion of these Municipal debt problems can be found at Muni Bonds May Not Be the Reliable Bet They Once Were