Just as our pensions got scrubbed in bankruptcy, a large number of municipalities simply can not afford the promises they have made. The Federal government has already been clear to Cities like Detroit; "you are not Goldman Sachs." Which is kind of a shame. AIG was forced to pay Goldman and German Banks 100% of their PROFITS on highly speculative derivative deals which right back into offshore accounts and shielded asset pools which may, or may not, get circulated back through the US economy. Mom & Pop public servant do spend their coin right here in the good ol' US of A and the loss of (or large reduction in) pensions will have a very immediate effect on not only them, but the communities where they live.

When the Fed says it is priming the pump, the idea is that money gets re-spent and cruises through the economy generating taxes. Money to Goldman does not prime the pump as effectively as keeping promises to folks who live week to week.