California May Need an Emergency Federal Loan

[Gone4Good]

California may need a $7 billion emergency loan from the federal government to pay for "teachers' salaries, nursing homes, law enforcement and every other state-funded service" this month, Gov. Arnold Schwarzenegger warns. . . . "Absent a clear resolution to this financial crisis that restores confidence and liquidity to the credit markets, California and other states may be unable to obtain the necessary level of financing to maintain government operations and may be forced to turn to the federal Treas

California may need $7 billion federal loan - CNN.com

But don't worry . . . the market will sort it all out.

 

[Notmuchlonger]

I blame Gray Davis.

 

[cute fuzzy bunny]

Me too. Is he still alive? I say we drive over to his house with some torches and pitchforks.

 

[Milton]

Why don't they just raise taxes? That's usually the way to "obtain the necessary level of financing to maintain government operations".

 

[Purron]

Why would Arnold want to do something politically unpopular like raise taxes when he can just hit up the Treasury for it? Republicans don't raise taxes even when it makes sense to do so. Plus, this way, we can all pay for the problem.

 

[Razor]

I blame Gray Davis.

How so? Didn't he want to raise taxes to lower the deficit?

 

[Martha]

For goodness sakes, the state has to raise taxes or reduce spending. Just passing the political buck.

 

[REWahoo]

Increasing taxes takes time - apparently California needs the money now.

 

[Donzo]

Grey Davis is holed up in his house - what a way to go.....CA Gov. and then a disgraced nobody. He's gotta have quite a liquor cabinet.

 

[IBWino]

For goodness sakes, the state has to raise taxes or reduce spending. Just passing the political buck.

Compared to California, the Federal government looks like an efficient well-managed operation.

Wish we could throw them all out and start over, but the California electorate is just as dysfunctional.

 

[Urchina]

What if Ahhhnold reimbursed the state for that expensive, crappy "special election" he rammed through during his first year in office? We voted down basically everything he brought to the table. He later took responsibility for the fiasco, but not fiscal responsibility.

Hey, Gobernator, it's not 7 billion but I know a few folks who could use some of that cash now....

 

[Disappointed]

Why don't they just raise taxes? That's usually the way to "obtain the necessary level of financing to maintain government operations".

CA has one of the highest tax rates, I do not how much more we can handle. I wish the government learns the LBYM philosophy from this board. Unfotunately, when it is not their own money, they will just spend, and spend, and spend, and spend, and spend, and spend, and spend, and spend, and spend, and spend, and spend, and spend, and spend..... uh I am tired of typing.

mP

 

[Notmuchlonger]

Me too. Is he still alive? I say we drive over to his house with some torches and pitchforks.

He maybe a bacon lover. Lets think about this a minute.

Wait lets raise the taxes. Ill be out of here in a few years hiding in my log cabin in some obscure state waiting out the end of my life!

Oh hell I got more editing. How about cutting some social programs.. Oh ahhh oh poppen fresh dough! Nah lets just raise the taxes

 

[cute fuzzy bunny]

What if Ahhhnold reimbursed the state for that expensive, crappy "special election" he rammed through during his first year in office? We voted down basically everything he brought to the table. He later took responsibility for the fiasco, but not fiscal responsibility.

Hey, Gobernator, it's not 7 billion but I know a few folks who could use some of that cash now....

You do sort of have to commiserate with him a little bit. We tossed out gray davis and put him in charge on a platform of shaking things up and changing the way california does business. The legislature promptly refused to go along with anything. He went to the voters to ask them to back him up on the reasons why we recalled davis and put him in charge. And the voters said "meh".

He had to have a few moments there where he wondered "Why am I here again? Just to stand around and make noises and not really make any difference?"

 

[Razor]

Arnold should ask Warren Buffet for the money. He has more money than the Federal government, which is 10 trillion in debt.

 

[Notmuchlonger]

Im still wondering where that huge surplus that California had went... The mysteries of the universe. Good news though they finished working on I 5! Hot damn! By the way I cant stand Arnold either.. Bring back Petey boy.

 

[cute fuzzy bunny]

Thats easy. The big capital gains taxes stopped rolling in around 2000 but the legislature kept spending until...errr...well actually they havent stopped yet...

 

[Notmuchlonger]

Thats easy. The big capital gains taxes stopped rolling in around 2000 but the legislature kept spending until...errr...well actually they havent stopped yet...

Im torn Cfb. Fargo or an ex basketball player. I wonder if he will give out those little basketballs at the elections. I might be tempted.

 

[cute fuzzy bunny]

Another "none of the above" set of election choices.

 

[Notmuchlonger]

Another "none of the above" set of election choices.

Id go for the one who offers some bacon... ..

 

[dizzy]

Any effect on CA muni bond funds?

I have a whack of VCADX. Sitting tight so far, but wondering...should I be worried?

 

[Independent]

Apparantly "business as usual" in CA means borrowing money to pay for routine expenses. I think matching taxes and spending so you don't have to borrow is a better idea - but that's so old-fashioned.

If I were a lender, with fewer dollars to lend than I had a couple months ago, I might focus on better risks than CA.

Maybe the "credit crunch" will be an eye opener in CA (I'm not holding my breath on that). I certainly hope the federal gov't doesn't think it has to bail them out.

 

[dizzy]

The current issue is about "revenue anticipation bonds" which are short term instruments. My understanding is that they have always been used to cover the bursty nature of the states receivables (collecting tax receipts only once a year). Problem is, the credit market is seized up, and no one will buy them....

I'm wondering if there are ways this could leak over to longer term CA bond market as well, and what the implications might be for those of us invested in funds like VCADX.

 

[Gone4Good]

Wow!!

After all the discussion on this board I'm surprised everyone is missing the point . . . so here it is:

CA is asking for a loan from the government because it's afraid it can't roll-over it's short term financing. This isn't about taxes or spending. It is about short-term liquidity.

Remember all the discussion about commercial paper (CP) and how companies may not be able to meet payroll, etc. etc. because of the credit crunch? Remember how some folks were opining that we should just let everyone default? Well the crisis is spreading and now entire states are at risk, with CA looking to be the first victim.

You may have noticed how tax exempt mutual funds are paying really, really, high yields? (I know there was a thread here on the topic). Do you think they are just being generous? Sorry, but no. They are struggling to raise short-term liquidity like everyone else. If the states can't refinance their short-term maturities they will default . . . welcome to the credit crisis.

But don't worry, the market will sort it all out.
​

 

[Gone4Good]

Apparantly "business as usual" in CA means borrowing money to pay for routine expenses.

You do realize that corporations and governments don't sit on piles of cash to manage their liquidity, don't you?