The Coming Biden Bailout of Blue States and Cities

The Federal Reserve’s latest interest-rate hike paired with the continuing bank panic is causing credit conditions to tighten. State and local governments could be the next sinking ships that Washington gets called on to rescue.

More than a decade of near-zero rates allowed state and local governments to borrow cheaply. At the same time, the Fed’s quantitative easing inflated asset values and prompted pension funds chasing high returns to pile into riskier higher-yielding investments. Now that the music has stopped, the bills for years’ worth of monetary exuberance are coming due.