Bankers and new accounting rules are emboldening governments to borrow-and-bet their way out of pension problems, a strategy that’s backfired in the past.
Facing a giant budget deficit, Louisiana Governor Bobby Jindal plans to borrow $750 million against future income from a landmark legal settlement with cigarette makers.
Wall Street pressed S&P, Moody’s, and Fitch to assign more favorable credit ratings to their tobacco bonds deals and bragged that the raters complied. Now many of the bonds are headed for default.