US Policy Makers Preparing for State Defaults (Bankruptcies)

According to Mary Williams Walsh of the NY Times (2011):

Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.

State defaults leading to some form of public bankruptcy will make the Wall Street crisis pale in comparison. Defaults in states such as California, Illinois, and New York would no doubt become the main events of the ongoing economic crisis in America.

Source: Walsh, M W (2011, January 20), Path Is Sought for States to Escape Debt Burdens, NY Times.