HANDS-OFF ON BROKE CITIES CALLED WISE FEDERAL POLICY

A strict hands-off federal policy when cities face bankruptcy, no matter how severe the emergency, could lead to more conservative financial practices and prudent borrowing, a study by the congressional Joint Economic Committee said.

"If local and state governments were convinced that a borrower of last resort was not available, their financial practices might become more conservative and their borrowing practices more risk-averse," it said. The study did not recommend t hat "extreme" option, but mentioned it as a possibility in a paper on state and local finances in a changing economy.

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