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52 of 66 people found the following review helpful
Whitney o9pens by telling us that she never looks at any one data point or an event in a vacuum, rather at a series of data points from myriad sources to tell the story of what is to come. Whitney looks first at consumer spending because it accounts for 70% of GDP and drives returns on most every asset classification and sector.

Early in her career she focused on subprime consumer lenders. Their prosperity and survival hinged on their access to cheap credit. One way of doing that was through securitization - bundling the loans they made into mortgage-backed or asset-backed securities. Sometimes, however, their access to the market faded, such as in the late 1990s right after the 1998 Russian credit crisis. Ten years later, New York-based financial giants were also into subprime. Many of those loans were bad, and in late 2007 investors pulled out of the securitization of their products. Lenders started falling like dominoes. Many banks didn't realize how much trouble they were in - residential real estate had been considered safe for decades. By 2009 the industry had lost over $600 billion in write downs, including about $60 billion at Citibank (Whitney correctly predicted Citibank's problems.) Five years later, over $7 trillion has come out of the lending system and over 30% of Americans have little or no access to credit.

Some regions were hit far worse than others - California, Nevada, Arizona, and Florida were hit the hardest by declining home values and negative equity. Worse yet, those states tended to also bet on rising home values, increasing spending (+72% in California, 98% in Texas, 114% in Nevada) - especially for municipal employees and teachers. (D.C., NYC, and Chicago seemingly competed with each other to see which one could irresponsibly grant the biggest teacher raises, without worrying about the impact on future pensions.) Outmigration has further added to the problems of some areas - eg. in 2004, Riverside was gaining 95,000 new residents/year, while four years later it was losing over 7,000/year. Many of those jobs lost in Riverside (and the rest of California) were higher-paying ones - between 2000 and 2008, California lost 370,000 jobs paying wages 25% or more above the state average, a reversal of the 65,000 such jobs gained between 1992 and 2000. Further, between 2000 and 2011, it gained no employment in science, technology, engineering, and math, vs. a 5% gain nationally and 14% gain in Texas. Meanwhile, eg. Ames, Iowa home prices went up only 5% by 2005, compared to 20% in Jacksonville, 41% in Phoenix, and 60% in Las Vegas.

The complicating factor in all this, however, is the new natural gas boom - especially boosting the economies in North Dakota and Texas, as well as in other states such as Pa and Ohio. Thus, drawing conclusions as Whitney does simply based on housing inflation and local spending becomes treacherous. Later she also somehow stirs into the mix the varying degree varying states have funded employee pensions, but since New York scores best here (the only state with 100%-funded employee pensions), while also being one of the most profligate in spending (despite not enjoying much in the way of a housing boom), the strength of her predictions as to which states will do the best in the near future is weakened.

U.S. home ownership now stands at 65%, down from its record 69% in 2006. Buying a home is much different in the U.S. - we've become accustomed to 30-year mortgages and tax-deductibility of mortgage interest payments. France, Germany, etc. have home ownership rates below 55%. Canadian mortgages typically are for only five years, mortgage interest is not deductible, and those defaulting can have their personal assets seized.

In December 2010, Whitney predicted 50 - 100 large municipal bond issues would fail. That didn't happen in 2011, and she points out that she never said they'd all occur in 2011. So far we've had bankruptcies in Orange County (2004), Jefferson County in Alabama (2011), Stockton, Mammoth Lakes, San Bernadino, and Detroit. I wouldn't bet against her.
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11 of 12 people found the following review helpful
on August 10, 2013
This is a easy read, until you start finding out just how out of shape our nation's
city's, counties, and states are. As I keep reading it I;m finding out how it happened
and where this poor financial management has happened across our nation. Great reading but don't try to go to sleep after reading it, you won't be able to! Very good information and Ms. Whitney shows us how it happened and what our states need to do to fix these problems.

Thank you Meredith Whitney for an excellent guide book into the mismanagement of our nations finances.
Victor Crane
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6 of 6 people found the following review helpful
on August 9, 2013
In "Fate of the States" Meredith Whitney argues that reckless state fiscal policy has destroyed the economies of America's Sun Belt and Coastal states, while more cautious state spending and pro-business policy in Central Corridor states have created robust economic growth. "This book addresses the boom and bust reshaping America, how they happened, and what can be done to narrow the gap between America's new have and have-not states." For Whitney, enemy number one is overspending on generous public-employee pensions. These massive liabilities have forced states to increase taxes and cut spending in more valuable areas such as education and job training. This has created a "negative feedback loop from hell" in which residents flee states where taxes are rising but paying for fewer and fewer services.

Whitney recommends that states in fiscal straits reduce pension benefits, either by increasing contributions or cutting benefits, reduce property, individual income, and corporate taxes, maintain or increase spending on education and job training, encourage oil and gas production, pass right-to-work legislation, and privatize state assets to close immediate budget shortfalls. The policy prescriptions are not very detailed and are supported more by anecdote than by data.

"Fate of the States" is a good outline of state fiscal policy but hardly a definitive work on the subject. The book is very short. Even with large type and generous line spacing it just barely passes 200 pages. The writing is casual and can be unnecessarily repetitive, such as when Whitney tells us multiple times on the same page that Indiana's toll-road lease netted $4B. Readers may have to wait until the dust settles on Detroit's bankruptcy for a more detailed and authoritative look at the fiscal crises plaguing America's state and local governments.
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22 of 28 people found the following review helpful
This book is a brilliant investigation into the perilous finances and reckless and/or misguided policy, taxation, and budgeting decisions that make so many of our United States prime candidates for economic meltdown. Although a novice on the subject, I found Whitney's prose style lucid and accessible--mercifully free of jargon and obscurantist verbiage--and her arguments equal parts compelling and chilling. I hope all members of our state (and federal) governments read Whitney's study, and heed her wisdom.
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4 of 4 people found the following review helpful
on August 17, 2013
I think the author did a great job bringing to light the reasons why some states are going to have a harder time than others moving forward from the 'Great Recession.' She argues that during the housing bubble, states that experienced the greatest growth also were the hardest hit when the bubble burst. The states that didn't experience the same dramatic rise and fall came out okay, and jobs are going to migrate toward the center of the country because those states aren't loaded up with debt.

My only complaints about the book are that she explains her premise right at the beginning and the rest of the book doesn't introduce any new ideas, just statistics to back up her argument. I could have put down the book after page three and gotten just as much out of it as I did reading the whole thing.

Also she talks a lot about certain states but not others. When she talked about mismanaged states she almost always was talking about California. When she was talking about well positioned states she almost always mentioned North Dakota or Texas. Most other states (including my home state of Nebraska) were only mentioned in passing, if at all. I'd would have like to have seen her examples be a little more varied, and not just talk about the same three states all the time. Since this is a national issue.

My suggestion - buy the book used. Don't spend $29 buying it new at Barnes & Noble. 3 out of 5 stars. It was good, not great.
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11 of 14 people found the following review helpful
on July 4, 2013
Meredith Whitney did a great job explaining how employee pensions affect city and state budgets for years to come, with everyone's services being affected. The facts she explains are those that are evident but people do not consider like states friendly to business, low debt, etc. A great book to make you think about where you want to live in the future
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10 of 13 people found the following review helpful
on June 16, 2013
This is the book for concerned citizens wanting to arm themselves with questions for their mayors, councilpersons, legislators, and other officials in meetings where the public can speak out. It gives a through overview of what is happening across the country to the economy and jobs at the state and local level. It explains why so many states and municipalities are in deep trouble. And what can be done, given the political will, to turn things around. It will take dedicated leaders unafraid of vested interests, and grassroots input and public support of such courage.

The thread that ties everything together is too much debt. Few who complain about the rash of cutbacks in government services grasp the full picture. Most haven't a clue that by law debt (municipal and state bonds) and pension payments to government employees have first claim on tax revenues. The funds earmarked in that direction can therefore not be used for basic services like education, garbage collection, and ordinary infrastructure which are what people really need and want. Meredith Whitney traces how all this came about as the housing bubble burst, in the process collapsing state and local revenues to varying degrees in the different states and communities.

What's new today is government ineptitude as causal force. This manifest in excessive spending during the boom times, all too much of which was through borrowing. Now deficits must be cut and the bloated debt serviced, with discretionary spending on services people want taking it on the chin. At the core of the overall problem are the rich contracts public sector unions negotiated during the good years. Far too much of the costs were camouflaged from the voting public. The gross underfunding of promised pensions has only now surfaced. In New Jersey, for example, the actual debt taxpayers are obligated for is at least four times greater than the bonds outstanding. Until new regulatory standards on full disclosure were required in 2009, taxpayers had no way of knowing that 75 percent of state and local debt was off balance sheet. Shades of Wall Street, and even more egregious because the wool was pulled over voters' eyes by the very people they elected.

Whitney claims 2008 will be a turning point in history. Just as when the crisis hit many indebted households flipped in giving precedence to their car loan rather than their home mortgage, she believes the priority payment for taxpayers is about shift dramatically away from debt service and public pensions to maintaining core services. Bankruptcies and pared back pensions are going to result.

Whitney's major insight from this empirical work is that in the decades ahead population will migrate from the debt-plagued coasts to the broad center of the country which is where the future growth will be. These are the states where, not unrelatedly from the standpoint of debt, housing was not much of a bubble. Hence the sound finances and low tax rates of states and municipalities will be the magnetic attractor of new and relocating businesses. Moreover, this will feed on itself. The dynamic: "More jobs, more spending, and more housing demand beget a larger tax base and better public service - which attracts new jobs and pushes home prices ever higher.

Fate of the States is that rare book that once read all the pieces fall into place.
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20 of 28 people found the following review helpful
on June 5, 2013
This is an excellent book. Meredith Whitney has a reputation for doing very thorough research, and this book doesn't disappoint. She offers a wealth of research to show that 1) states that experienced the housing bust are stuck in a "feedback loop from hell" which will be extremely difficult to come out of, and 2) states that didn't experience this boom-bust (i.e., mostly in the central "corridor" of the US) are experiencing solid growth and welcoming new businesses. Her analysis of the unfunded pension liabilities alone makes this book a worthwhile read -- as it should scare anyone who holds municipal bonds (especially those issued by troubled municipalities). Given Whitney's prominence, I suspect we'll be seeing a lot of people slamming the book. But I would invite all these critics to come to California to experience exactly the kind of fiscal difficulties that she details.

A more detailed review can be found here: http://seekingalpha.com/article/1481651
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26 of 37 people found the following review helpful
As a former Republican turned Independent when George Jr. was elected, Whitney's book reflects my feelings on the dire financial straits of states and cities. Our Democrats & the GOP have done a wonderful job of keeping us off the issues of finances. Whitney drills down to the state & city levels to clearly articulate the futures we face.

I think her point that it all starts at the city and state levels is extremely important. So often as voters we feel helpless as all these things happen in Washington DC. Only after reading her book will you see that the problems and your ability to control these problems are really at the state and local levels.

Too often we hear criticism without solutions. Whitney tells us about the challenges we face and then offers realistic alternatives. Just like she was right on the real estate/bank fiasco, she will ultimately be correct in her vision for the challenges cities & states will face.

When we see our state and local governments continually refinancing their debts (i.e. bonds), Whitney does a terrific job of explaining exactly what they are doing. For me and hopefully for others, her book will serve as a "wake-up" call. We as voters can no longer sit back and expect our politicians to do the right thing.

This was a great book that I will encourage all my hard-right-wing friends (i.e.Tea Party) to read Whitney's words of wisdom. And would encourage others to do the same. It is well worth your time and money.

Ron G. Cheek, PhD
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7 of 9 people found the following review helpful
on July 16, 2013
I would say I had great hopes for the book...just a bit repetitive....I was looking for the book to get more into the "weeds" of state and local government finances to illustrate the issue more clearly.
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