Could the subprime mortgage crisis cause more potholes and college dropouts?‘s Daniel Vock explains how the subprime mortgage crisis could ensnare state governments:

…cities and states that issue tax-exempt bonds to raise money for such projects as road and bridge work or rely on investors to raise student-loan money could confront a series of new problems stemming from the subprime mortgage meltdown…

The problem isn’t with cities or states issuing the securities but with the insurance carriers that promise to pay interest and principal on municipal bonds in the unlikely event that states or local governments default. In recent years, the insurance carriers also began guaranteeing securities based on car loans, commercial real-estate deals, credit card debt and mortgages, including subprime loans that are now defaulting.

Today’s Boston Globe also reports on how the subprime fallout is hurting colleges, hospitals, and other nonprofits.