New Economy Citizen Media

Vallejo CA looks at Default

Friday February 22, 2008

Vallejo California may be forced into bankruptcy. Could this be the first domino to fall in the next financial crisis?

For 150 years Vallejo California was a Navy town. Mare Island Naval Shipyard called the city home from it's inception in the mid 19th century until it's closure in the mid 1990's. Vallejo survived and prospered after Mare Island as a bedroom community to the San Francisco Bay area and benefited greatly from the housing bubble.

Now the economic tide has turned. California has suffered greatly in the collapse of real estate and sky rocketing foreclosures. The city of Vallejo is having difficulty meeting it's obligations. There has been talk on the financial web sites about default and if that default might be the first domino to tumble in a very long chain. If this is the case, none of this will end well. Mish Shedlock is one of my favorite writers on Minyanville.com. Mish first alerted me to Vallejo's possibly default earlier in the week.

The following paragraphs are excerpted from the Vallejo Times Herald newspaper web site. A town hall meeting was held on Feb. 21 to address possible actions.

Attorney Robert McConnell, a city planning commissioner, outlined the basics of what it would mean if the city did file bankruptcy.

Vallejo is faced with a $6 million shortfall and may be unable to pay city employees by mid-April.

If the city does file bankruptcy, McConnell said it would be in the residents' best interest to form a cohesive citizen group and come before the bankruptcy judge with a carefully formulated opinion.