US states seek way to file for bankruptcy

Source: Press TV
http://www.presstv.ir/detail/161305.html


American policy makers are trying to determine whether they could let states declare bankruptcy as they confront crushing debts and dwindling revenues.

House Republicans and Senators from the two major political parties have shown an interest in the matter. They have called on bankruptcy lawyers and a former House speaker, Newt Gingrich, to come up with a solution which paves the way to such a measure, The New York Times reported on Thursday.

The report comes as states face a combined pension fund shortfall of USD 3 trillion, according to finance professors' estimate.

Proponents say bankruptcy could permit a state to alter its contractual promises and get out from under massive debts.

Nevertheless, states cannot seek protection in the US Bankruptcy Court as they are considered sovereign.

Financial experts say any effort to simulate Washington's response to a state's request for a bailout would be difficult as major constitutional burdens have to be removed.

Some American cities reportedly run high risk of bankruptcy. The City of Harrisburg, Pennsylvania, is said to have received legal advice to petition for bankruptcy as it is teetering on the edge.

Hamtramck city in Wayne County of Michigan has also sought bankruptcy protection to cover deficits. The request has, however, been turned down by the state of Michigan.

It appears that years of generous spending and lofty pension promises to employees are coming to end across the United States as states are suffering severe financial hardship.