Before the 2008 financial crisis, municipal bonds were fairly simple: You bought a AAA-rated investment, or debt that was insured, and your clients collected tax-free income until the bond matured.

Today that tax-free income is low and fear of default is high, fanned by a string of recent municipal bankruptcies. And insurance plays a much smaller role now that investors have realized that the guarantors can’t make everyone whole in a crisis.

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