Judgment Bonds : Planet Money Municipalities are increasingly going to the bond market to pay their court settlement costs.
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Judgment Bonds

Municipalities — that's towns, cities, states and even universities — have been in the news a lot this year, thanks to a number of high-profile court cases and some big settlements. Like the ruling against Michigan State University, where the court said the college has to pay large sums of money to women and girls abused by doctor Larry Nassar. Or the ruling against the City of Dallas, which has to pay large sums to police and firefighters.

Municipalities used to pay judgments made against them using their reserves: money they made from taxes that they kept in a rainy day fund. These days, they're increasingly going to the bond market. According to Bloomberg, municipalities have so far this year raised $1.6 billion in the muni bond market to pay for legal judgments. That's up from $826 million in 2017 and $281 million in 2016. And that's a problem, for bond buyers and bond sellers alike.

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Correction Oct. 30, 2018

A previous image had too many zeros, indicating the amount was $1.6 trillion. The correct number is $1.6 billion.