A research paper discussing the extent of municipal bond defaults during the 1930's. Here are a couple of excerpts.
"Of all defaulting issues, 48.1% were Aaa rated in 1929 and 78.0% were rated Aa or better."
The paper was based on research done in the '60's. Here is a quote from that 60's paper:
“Problems develop when the expectations of the borrower and lender prove to have
been too optimistic. The danger of overoptimistic expectations is probably the greatest
during periods of sustained economic prosperity. At that time the expectations for
future income and the prospects for selling assets are at a maximum. Such optimistic
expectations may lead many individual borrowing units into accepting future
commitments dangerously large in relation to their resources and without sufficient
allowances for possible future emergencies. For the total economy, there is a distinct
danger of an overexpansion of economic capacity during such optimistic periods. This
overcapacity is undesirable and may contribute toward and increase the severity of a
subsequent recession.”
http://www.mcdonnellinvestments.com/FIFIles/Municipal%20Default%20History%20Commentary%20-%2041408%20-%20REVISED.pdf
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