The bankruptcy of the most populous county in Alabama moved closer to resolution this week with an agreement providing that investors will lose 20 percent of the money they invested in bonds that were rated AAA, according to a commentary in the New York Times today. The big loser financially is JPMorgan Chase, which underwrote many of the securities—and paid bribes to get the business, according to the commentary. The Jefferson County bankruptcy may serve as a precedent for forcing bondholders to take losses in bankruptcy. Jefferson County’s problems involve corrupt politicians and bad luck, but they also include a longstanding unwillingness to face facts about the county’s sewer system—and a bond market that kept lending money to the county long after it was prudent to do so, according to the commentary.
