California bankruptcies will likely rise, Moody's Investors Service said on Friday, adding that it is considering credit rating downgrades as financial stress on cities and other localities continues to rise, Reuters reported on Friday. Three cities have sought bankruptcy protection since June, including Stockton, which became the largest U.S. city ever to file. The housing bust and California laws that limit tax hikes and encourage negotiations could raise that number, Moody's Investor Services said.
In related news, California's treasurer is exploring creating a new system to identify fiscally stressed cities and help them avoid default or bankruptcy, Reuters reported on Friday. California's policy of "home rule," which gives localities considerable freedom from state interference is seen as a major obstacle in devising an anti-default and anti-bankruptcy plan. The new system being devised by California Treasurer Bill Lockyer would use a number of data points - which have yet to be determined - to assess the fiscal health of a locality. Any new system for California would not be ready this year, Lockyer's office said, noting that the governor, the controller, the Department of Finance, and the legislature would all likely have to be involved.
http://www.reuters.com/article/2012/08/18/usa-california-treasurer-bank…