City of Chicago’s cash plummets, debt triples, arrests drop

Mayor Rahm Emanuel closed the books on 2012 with $33.4 million in unallocated cash on hand — down from $167 million the year before — while adding to the mountain of debt piled on Chicago taxpayers, year-end audits show.

Last week, Moody’s Investors ordered an unprecedented triple-drop in the city’s bond rating, citing Chicago’s “very large and growing” pension liabilities, “significant” debt service payments, “unrelenting public safety demands” and historic reluctance to raise local taxes that has continued under Emanuel.

The 2012 city audits explain why. They show that an unallocated balance that was $167 million a year ago because of Emanuel’s aggressive cost-cutting efforts has dropped to $33.4 million.

Budget Director Alex Holt blamed the $133.6 million drop on “honest” budgeting and ending the long-standing practice of carrying “ghost” vacancies. Read more >>

Fitch Downgrades United Kingdom

Fitch Ratings has downgraded the United Kingdom's Long-term foreign and local currency Issuer Default Ratings (IDR) to 'AA+' from 'AAA'. The Outlook is Stable. At the same time, the agency has affirmed the UK's Short-term foreign currency rating at 'F1+' and the Country Ceiling at 'AAA'.

The rating actions follow the conclusion of the review of the UK's sovereign ratings initiated on 22 March and resolve the Rating Watch Negative. The previous Negative Outlook on the UK's sovereign ratings had been in place since 14 March 2012.

The downgrade of the UK's sovereign ratings primarily reflects a weaker economic and fiscal outlook and hence the upward revision to Fitch's medium-term projections for UK budget deficits and government debt. Despite the loss of its 'AAA' status, the UK's extremely strong credit profile is reflected in its 'AA+' rating and the Stable Outlook. Read more >>

Spain Downgraded to One Level Above Junk

Spain’s debt rating was cut to one level above junk by Standard & Poor’s, which cited mounting economic and political risks as the government considers a second bailout. The country was lowered two levels to BBB- from BBB+, New York-based S&P said in a statement yesterday. S&P assigned a negative outlook to the nation’s long-term rating and lowered the short-term sovereign level to A-3 from A-2.

“The negative outlook on the long-term rating reflects our view of the significant risks to Spain’s economic growth and budgetary performance, and the lack of a clear direction in euro-zone policy,” S&P said. “The deepening economic recession is limiting the Spanish government’s policy options.”

The downgrade comes after Spain announced a fifth austerity package in less than a year and published details of stress tests of its banks. Creditworthiness concerns have grown since the government requested as much as 100 billion euros ($128 billion) in European Union aid to shore up its lenders and amid signals that the deficit target is in jeopardy. Read more >>

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Moody's downgrades 13 Italian banks

Ratings agency Moody's Investors Service is downgrading the credit ratings for 13 Italian banks three days after cutting the Italian government's bond rating.

The government's lower rating means Moody's believes it is at greater risk of defaulting on its debts and "indicates a similarly increased risk that the government might be unable to provide financial support to its banks in financial distress."

Moody's dropped seven banks by one notch, the other six by two notches. They all remain investment grade.

The downgraded banks are: UniCredit and UniCredit Leasing; Intesa Sanpaolo; Banca Carafirenze; Banca IMI; Banca Monte Parma; Cassa di Risparmio di Parma e Piacenza; Banca Popolare Friuladria; Banca Carige; Credito Emiliano; GE Capital SpA; Cassa Depositi e Prestiti; and Istituto Servizi Mercato Agricolo Alimentare. Read more >>