Citigroup (NYSE:C), JPMorgan (NYSE:JPM), Others to Offer Billions in Municipal Loans

In what could become a disaster, the Wall Street Journal reported (citing unidentified banking executives) that Citigroup (NYSE:C) and JPMorgan (NYSE:JPM), among other financial institutions, are piling up billions in order to make loans to various municipalities across the nation.

The purpose of the loans will be to refinance existing obligations or for the development of various, new projects.

why the banks are setting aside the money is to create an alternative to the bond market.

Wait a minute! I thought there were no problems with municipal bonds; that there were no real threats of default as Meredith Whitney and Warren Buffett have stated.

If there aren't, why are the giant banks putting the billions aside for then?

This is a disaster waiting to happen. Of course if the state, regional and local governments are able to pay the loans, they can just get it from the taxpayers via Ben Bernanke's Federal Reserve.

I thought the reason for the route in the House was because of out-of-control spending? If that's the case, then voters need to remind their representatives they need to slash the size of government and spending, not go even further into debt.

What is it these governments don't understand. Even the Federal Reserve knows the economy isn't growing fast enough to create new jobs.

With that being the case, what economic miracle do these governments think is going to happen to suddenly pay off these loans?

Something smells here. These banks shouldn't be allowed to borrow money to various bankrupt municipalities, creating more extraordinary risk into the economy.

Just because declaration complete default hasn't happened has nothing to do with the reality that dozens of cities and counties are on the verge of governmental economic collapse.

The most responsible thing to do is to admit the promises made to people aren't sustainable, and from there start eliminating the endless number of programs all the levels of government have instituted.

This only confirms the collusion between the giant banks and the federal government.