Municipal bond defaults on the local level are likely and investors would be better off avoiding them, according to Kyle Bass, managing director of Hayman Capital Partners.
Bass said he generally agrees with the call by famed banking analyst Meredith Whitney, who said as many as 100 defaults are likely that will cost more than $100 billion in damage.
Though Whitney's call has prompted substantial backlashfrom her colleagues in the industry, Bass said the question is more a matter of degree.
"There are going to be a number of muni defaults, but it's where you draw the line," he said. "Will states be allowed to default? Will legislation be introduced to allow states to restructure? I don't believe that's the case. I believe states will not default."