Meredith Whitney to Moneynews: Struggling States Lack Political Will for Change

Sunday, 09 Jun 2013 07:09 PM

By Dan Weil and John Bachman

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
It's a tale of two countries written by financial analyst Meredith Whitney, CEO of Meredith Whitney Advisory Group.

For the middle of the country — states like Nebraska, Iowa, Indiana and North Dakota — things are going great, she tells Newsmax TV in an exclusive interview. But the real estate-boom states like California, Arizona, Nevada and Florida are still in trouble.

As for the weak states, "sadly, in the worst examples of the housing bust and in the worst examples of cities and towns that are really on the decline and suffering from budget imbalances, you have the worst political situations," says Whitney, author of the new book "Fate of the States."

Watch our exclusive video. Article continues below.



"So you have no political will to make big changes. And so in these areas you're seeing defaults, you're seeing big contention over pension re-drafts, you're seeing big unrest over the decline in social services."

This is a major issue for the country, Whitney notes. "One of the many solutions I raise in this book is privatization," she adds.

Editor's note: To order 'Fate of the States' at a great price — Click Here Now.

That's what Europe did in the 1990s, selling off everything from roads to bridges and reaping more than $1 trillion in the process. "The states in the United States are so asset-rich they have that opportunity and that chance to raise money and actually not cut from programs right in front of them," Whitney explains.

The problem: "Historically there's been no political support behind this," she asserts. And what else distinguishes the weak states from the strong?

"When you think about the exact reasons why so many states that were big economic boom states during the real estate bubble ... are in so much trouble today, not only are the consumers in so much debt on their homes, but so too are the governments," Whitney contends.

There was a vicious cycle. "Governments spent like housing would never go down, as consumers spent like housing would never go down and as banks spent like housing never would go down. There's not a lot of available credit or dry powder for those areas to keep spending."

Editor’s Note: Put the World’s Top Financial Minds to Work for You

But the central states didn't go through either a housing boom or bust, Whitney notes. "So there was far less volatility in their daily lives," she explains. "Plus the banks didn't target them, so there's far less leverage there. And then the states are just more conservatively managed on a fiscal basis. So there's more dry powder." The states are benefiting from their loose ties to real estate, Whitney points out.

"People are not only working [in these states], but they also have far more discretionary spending and credit available to them," she proclaims, adding that that's why spending is growing 30 percent faster in the central corridor than it is on the coast.

"It's sort of success begets success, and so you have strong consumer demand, you have businesses that want to invest in these states, that want to build new facilities in these states because of cheap energy, because of low taxes."

Editor's note: To order 'Fate of the States' at a great price — Click Here Now.

© 2014 Moneynews. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
 
You May Also Like
Around the Web

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved