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Judgment Bonds

NPR

Municipalities — that's towns, cities, states and even universities — have been in the news a lot this year, thanks to a number of high-profile court cases and some big settlements. Like the ruling against Michigan State University, where the court said the college has to pay large sums of money to women and girls abused by doctor Larry Nassar. Or the ruling against the City of Dallas, which has to pay large sums to police and firefighters.

Municipalities used to pay judgments made against them using their reserves: money they made from taxes that they kept in a rainy day fund. These days, they're increasingly going to the bond market. According to Bloomberg, municipalities have so far this year raised $1.6 billion in the muni bond market to pay for legal judgments. That's up from $826 million in 2017 and $281 million in 2016. And that's a problem, for bond buyers and bond sellers alike.

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Corrected: October 29, 2018 at 11:00 PM CDT
A previous image had too many zeros, indicating the amount was $1.6 trillion. The correct number is $1.6 billion.
Stacey Vanek Smith is the co-host of NPR's The Indicator from Planet Money. She's also a correspondent for Planet Money, where she covers business and economics. In this role, Smith has followed economic stories down the muddy back roads of Oklahoma to buy 100 barrels of oil; she's traveled to Pune, India, to track down the man who pitched the country's dramatic currency devaluation to the prime minister; and she's spoken with a North Korean woman who made a small fortune smuggling artificial sweetener in from China.
Paddy Hirsch
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