I was back on CNBC with Rick Santelli on Tuesday May 19. The topic once again was municipal bonds with a spotlight on Chicago. Here are a pair of videos.

Live Santelli Exchange

CNBC’s Rick Santelli discusses Chicago’s credit downgrade and municipal bond crisis, with Mike Shedlock, Sitka Pacific Capital Management. 

Link if video does not play: Santelli Exchange: Illinois’ unfunded pension liabilities

What’s next for Chicago’s debt crisis? 

In an extended segment, CNBC’s Rick Santelli discusses Chicago’s municipal bond crisis with Mike Shedlock, Sitka Pacific Capital Management.

Link if video does not play: What’s next for Chicago’s debt crisis

The slides in the videos are courtesy of the Illinois Policy Institute. Santelli drew an amusing schematic of the 2011 tax hike showing where the money went. Here is the original chart.

John Cullerton: “Tax increase helped state pay bills and debt.” October 28, 2014.

In the second segment, I mentioned Mike Madigan, Speaker of the Illinois House. I know full well Madigan is Speaker but the words “House Speaker” did not come out of my mouth. I was thinking of mentioning John Cullerton, “Senate President”, and those were the words that came out of my mouth.

In Illinois, Madigan and Cullerton are the two guys that control every bit of legislation. 

Beware, the Tax Man Has Eyes on You

In case you missed it, please consider my May 4, article Beware, the Tax Man Has Eyes on You: Potential Hike for Illinoisans is Staggering.

Nuveen estimates that property taxes in Chicago will need to rise by 50% to bail out Chicago pensions. I believe the required tax hike would be much higher.

When Nuveen came up with the 50% property tax hike, it did not include tax hikes to bail out other Illinois pension plans. Nor did it address the $9 billion budget deficit for the state. Nor did it consider the possibility (I believe likelihood) of negative stock market returns for years to come.

For further discussion please see my April 23, article Seven Year Negative Returns in Stocks and Bonds; Fraudulent Promises.

Egan-Jones Chimes In 

On Monday, I gave Sean Egan of the rating agency Egan-Jones a ring. I asked him how he would rate Chicago General Obligation bonds. Egan replied “deep in junk territory”.

Here is a table I put together of various rating agencies, incorporating Sean Egan’s response.