McHenry: Whitney Should Testify to Congress on Munis
Since Meredith Whitney made her dire prediction that 50 to 100 municipalities may default on their debt, Congressman Patrick McHenry (R-NC), chairman of the Financial Services and Bailouts of Public and Private Programs subcommittee, has wanted to have her testify to explain her findings.
Whitney declined to participate in that February hearing but that doesn't mean McHenry has dropped the matter. I caught up with him to get his thoughts and is he satisfied with her latest explanations.
LL: Whitney said the muni market has the "darkest pools" her firm has ever seen. How dark are these pools and can the situation be far worse than being predicted or is that statement just simply a hedge in the event she is wrong?
Rep. McHenry: Well that’s why we asked her to testify. Our own hearings found that public pension funds are drastically under funded, but we’d like to hear what she has to say.
LL: The market has moved against Whitney. She says she knows she is right. Who do u think is right?
Rep. McHenry: We know that states and municipalities are on the hook for much more than their reporting suggests. State revenues have increased slightly but under funded pensions are still much more of a problem than they would like to admit.
LL: June is the important month to look at according Whitney given many states have balanced budgets due and the fiscal stimulus money officially over. She said the impact of this would be seen in the cycle. Do you agree and what time frame are you anticipating to see an impact?
Rep. McHenry: Most states do have to complete their budgets around June. We’ve seen many states making sacrifices in the form of decreased services or increased costs to taxpayers to close budget gaps. I wouldn’t predict any major defaults, but you may see a lot more trouble at the municipal level.
LL: Whitney says she is doing a "state service" shedding light onto this problem and is surprised she is the only one warning on this crisis. Why is that?
Rep. McHenry: If she was doing a state service, she wouldn’t have declined to come before our committee and explain her findings.
LL: I know you can not subpoena Ms. Whitney to testify before Congress. Since she won't come to DC, were you satisfied with her answers?
Rep. McHenry: I believe that Ms. Whitney's revised observations are not in opposition to the House Oversight Committee's findings.
Conservatives took control of many states in the last election and are making the tough, necessary decisions to right our fiscal situation—however, they’re making up for years of over-promising and over-spending. State governments have been on a spending binge for decades, and measures to enhance transparency will produce an honest picture of our financial situation.
At the federal level, I have cosponsored legislation, introduced by Congressman Nunes, to bring public sector disclosures in line with accounting practices already demanded of businesses across the country. I believe this bill and other transparency and disclosure measures will allow us to begin a serious discussion—based on honest numbers and facts—that puts our nation on a path to job growth and economic health."
A Senior Talent Producer at CNBC, and author of "Thriving in the New Economy:Lessons from Today's Top Business Minds."
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