General Obligation Bonds Come to Critical Test in Alabama Bankruptcy

``General obligation bonds are thought to be perfectly safe because they are backed by the ability to tax, no matter what it takes to pay off the obligation. I have been waiting for a test of this theory and that time is at hand. Jefferson County Alabama filed the biggest bankruptcy in the history of the US and has stopped paying interest on its general obligation bonds... The key issue now is what happens to the "Full Faith and Credit" theory now that the county has defaulted following a bankruptcy declaration.''