California Wants US Treasury to Backstop Loans

[villager]

Source: LA Times


California wants U.S. Treasury to backstop loans

The state needs to borrow $15 billion to keep paying its bills. With its credit rating in the cellar and former guarantors with troubles of their own, officials say U.S. backing may be the only hope.

By Evan Halper Tom Petruno

Reporting from Los Angeles and Sacramento -- First came the banks and insurance companies. Then the auto industry. Now, with California on the verge of financial collapse, state leaders are demanding an unprecedented federal rescue of their own.

They say they need the Obama administration to step in and back billions of dollars in emergency loans. If Washington fails to do so, the state could start running out of cash in July and then would have to stop paying huge amounts of its bills. That, in turn, could set off dangerous ripples throughout the economy, state officials say.

The argument is familiar. Just like AIG and General Motors, California says it is too big to fail.

"A fiscal meltdown by California . . . would surely destabilize the U.S., if not worldwide, financial markets," State Treasurer Bill Lockyer wrote in a May 13 appeal to U.S. Treasury Secretary Timothy Geithner.

Such federal assistance for a state has never been tried before, experts say. The last time the U.S. Treasury acted in any comparable way was during the financial crisis in New York City in the 1970s. And that assistance came with strings attached -- as the recent bailouts of the auto and financial industries have -- with the city government forced to cede some control of its finances.

"We're in uncharted waters," said Jason Dickerson, a budget expert at the state Legislative Analyst's Office. "We've never been here before."

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Read more: http://www.latimes.com/news/local/la-me-loans21-2009may21,0,6721355.story?track=rss

[tomm2thumbs]

1. Gray Davis must be spinning in his shoes - recalled and his replacement does this?

Careful what you wish for - the boring guy sometimes has the smarts to make things happen and the flashy guy just might get you into deep trouble.

[driver8]

3. Many of us knew that Arnold would suck...and we were right!

But too many Californians thought it would be cool to have the Terminator as our Governator!!

[AndyTiedye]

13. Los Angeles/Hollywood Supports Him Because He's a Movie Star, Freepers Support Him Because He's R

There really isn't anything the rest of us can do about it.

[Control-Z]

18. I've never understood

what would possess anyone to believe that a muscle head/bad actor would be qualified in any way to run a state. I liked some of his movies. And I was able to overlooked his acting ability, or lack thereof, for the comic character fun of them. I'm not as generous when it comes to politicians.

His only asset, imo, is his wife, Maria.

[WhiteTara]

21. he was a plant by the Enron boys

we were screwed by Diebold. They stole Riverside county with the electronic touch screens.

[pinto]

2. Good overview of the state's fiscal mess and this proposal. Thanks for the post.

CA's going to have to borrow from someone pretty quick. State officials have predicted the "possibility" of large scale program cuts in all areas. Some of it was probably fear mongering to push for a budget compromise and garner support for the recent ballot initiatives, yet it seems there are sure to be cuts made. How deep and how broad is up in the air.

[Frances]

4. My local newspaper says CA needs a new constitution

The present constitution in the reason for this mess.

The initiative process ensures that the super rich individuals and corporations do not pay their fair share.

[Robbien]

5. Back when NYC was in trouble, headlines read "Ford to NYC: Drop Dead"

Ford later backed down and helped NYC, but the damage was done.

Ford lost his re-election bid.

[w4rma]

19. Bush didn't "lose" his reelection bid when California needed help against Enron. (nt)

[XemaSab]

6. Why should the rest of the country pay for California's mess?

I'm a lifelong Californian, and we happily voted ourselves into this position. :shrug:

[Patchuli]

8. Perhaps because the rest of the country

gets a large amount of their FOOD from us? Maybe because we pay a HUGE share of federal taxes and receive far less than other states in return? California IS too big to fail and it will fuck up the economy royally. Maybe we could all stop paying so much to Welfare Queen states like Alaska?

[WriteDown]

9. Too big to fail.....

Seems like I've heard that somewhere else before.

[Patchuli]

22. California is not a sleazy corporation

California is my birthplace and helps feed America. I guarantee you wouldn't want to see your food supply get cut down and your prices go sky high due to a ruined California economy.

Sleazy corporations and pResidents are more a Texas thing. :sarcasm:

[WriteDown]

23. Okay...

you get TARP money, but cut produce prices in half. Fair for all.

[Patchuli]

24. You want my tomatoes bad, doncha?

You wouldn't have the yummy pasta sauce without California and you know it! I do think the produce price reflects gas prices, unfortunately...

:fistbump:

[WriteDown]

26. Nonsense....

I use San Marzano tomatoes from Italy. And my avocado's come from Mexico and does most of my produce. Regardless, the cost of fresh produce really has to come down :).

[Patchuli]

27. Nothing's going to come down in price

anytime soon unfortunately.

Shame on you for buying foreign!

[AndyTiedye]

12. The 8 Billion that Enron STOLE From Us Would Come In Real Handy About Now

[nichomachus]

16. Well, since Arnold helped them steal it, maybe he can get it back n/t

[depakid]

30. There's a lot of blame to go around there

A lot of groups warned the legislature what would happen if they went along with the corrupt deregulation plans- but ALMOST NONE OF THEM Democrats or Republicans listened. DWP was smart enough not to go along with it- but the rest of the idiots got burned- even though it was OBVIOUS to anyone who bothered to actually read up on the issue what was going to happen.

[Xolodno]

7. The states ballot initiative...

...and hard gerry-mandered are responsible for the current mess.

Doesn't matter who is governor, the mess would have been the same. There is simply little a California Governor can do.

Question is,what happens should the state declare bankruptcy?

[villager]

14. That, and the fact that a 1/3 (and rightwing minority) in the legislature

...can derail any sensible budget agreement...

[Romulox]

10. If California gets a bailout, where's Michigan's??? nt

[WriteDown]

11. Excellent question....

I guess Michigan isn't too big to fail. :shrug:

[depakid]

29. Tell us again how much we've sent to the failed automakers?

[strategery blunder]

15. Strings I'd attach to a California Bailout

Repeal Prop 13! :evilgrin:

Also hold a Constitutional Convention to fix the ungovernable-state problem long-term.

[nichomachus]

17. More strings

Do away with the idiotic ballot initiative fiasco. It is an unmitigated disaster.

Special interest groups put weird propositions on the ballot. People really can't understand them. And, the matter is decided by a handful of voters who are usually deceived by lies and slick ads.

If they want to keep it, make it so any initiative, in order to pass, needs 60 percent of registered voters. That will keep stuff like Prop H8 off the ballot, but will still allow an avenue for "the people" to speak, it there is some issue on which there is very broad agreement.

Every election, I talk to people about ballot questions and, with the exception of PropH8, people have no idea what they're voting for. Even with PropH8, many of the people who voted for it, did so because they were lied to repeatedly by their clergymen. They really thought they were voting for something else -- many were told they had to "save" their churches, which would be sued or shut down if they refused to perform same-sex marriages.

[Blue_Tires]

20. why has there NEVER been a recall petition for Arnold?

they had a lot of fun getting rid of Davis, who by my observation wasn't anywhere near as bad...

and how does a state with that many people, resources and revenue streams end up in debt?

[1]

25. hey, california... you got yourself into this mess. now its up to you to get out of it.

sack up, california. do what YOU have to do.

but don't ask me to fix the shit you created.

[depakid]

28. Typical cut off your nose to spite your face response

As if California's going through this and slashing jobs and specding won't hurt the macroeconomy- which of course, likely means you'll be feeling it too.