Meredith Whitney made news recently for her bearish views on the weakness of municipal finances, which she predicts could result in a raft of defaults. In fact, she expects there will be between 50 and 100 "significant" municipal bond defaults in 2011, wreaking massive carnage to the tune of "hundreds of billions."

That has prompted some criticism by a Bloomberg columnist who says "hundreds of billions of dollars in default? The number is in the realm of the fabulous. If pressed, I would say that we might see between 100 and 200 municipal defaults next year, maybe totaling in the $5 billion or $10 billion range."

He notes a report from Fitch suggesting debt costs are a relatively small part of municipal budgets. He thinks Whitney's report amounts to a marketing tool, a headline grabber. Though ye should note that hyperbole does work.

Last year, Whitney made headlines for her prediction that more than 300 banks would fail in 2010. So far, 157 have been shuttered this year. That's significant, even if it fell short of her prediction. Similarly if 25 to 50 municipalities default on bonds worth $50 billion, it will certainly be substantial. We can only hope she has overestimated the number of defaults to occur and the dollar amounts involved.

For more:
- here's the column

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