Results 1 to 10 of 10

Thread: If you liked the GM bailout you'll LOVE this. [proposed California Bailout]

  1. #1
    Banned Eric Stoner's Avatar
    Joined
    Oct 2006
    Location
    NYC
    Posts
    5,150
    Thanks
    1,261
    Thanked 1,430 Times in 888 Posts

    Default If you liked the GM bailout you'll LOVE this. [proposed California Bailout]

    After California's voters rejected all the Budget Initiatives ( except the one forbidding legislative pay increases during times of deficit ) Barack and the Obamas are readying a bail-out of California that will preserve the very unions ( teachers; prison guards; state clerical workers) and their contracts that created the budget mess in the first place.

    The alternatives, of course, are either serious budget cuts or default ( effectively bankruptcy for the state).

  2. #2
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: If you liked the GM bailout you'll LOVE this.

    Here is the gist of Obama's California bailout plan, already being pitched to congress by Pelosi. California wants the FED (a.k.a. taxpayers of the other 49 states) to step up and 'guarantee' repayment of newly issued California municipal bonds which would allow California state politicians to continue spending even though their own taxpayers refused to foot the bill for that spending in yesterday's special election ! The FED is reluctant to set this precedent, since it would almost immediately lead to NY, NJ, IL and every other state with huge state deficits and deteriorating credit ratings to line up at the federal trough. Obviously states like Texas, Florida, South Carolina etc. oppose such a measure since it effectively transfers a 'state' tax burden (which they themselves have managed to keep very low, but California etc. have racked up to very high levels) into a higher 'federal' tax burden for citizens of their state (which the Texas, Florida South Carolina etc. governors would have no control over, and in exchange for which the citizens of Texas, Florida, South Carolina etc. would receive no additional benefits).



    (snip)"May 21 (Bloomberg) -- The Federal Reserve told a congressional committee today that it is reluctant to extend guarantees to California and other municipal market borrowers struggling to sell bonds.

    The House Financial Services Committee, chaired by Massachusetts Democrat Barney Frank, is conducting hearings on four municipal finance bills, including one that would give the Fed authority to guarantee the repayment of variable-rate bonds and short-term notes. Another measure would create a public finance office in the Treasury Department to reinsure $50 billion of municipal bonds through 2015. Insurers, including MBIA Inc. and Ambac Financial Group Inc., lost top ratings, limiting the value of that coverage.

    The Fed is “quite concerned” about guaranteeing municipal bonds, David Wilcox, the deputy director of the Fed’s research and statistics division told lawmakers this morning. The Fed could suffer losses if it ended up holding long-term municipal securities that it had to sell to shrink its balance sheet after it provided short-term guarantees, he said.

    “The Federal Reserve has important misgivings about assuming such a role in light of the potential for decisions about the provision of credit to states and municipalities to assume a political dimension,” Wilcox said. He urged Congress to “narrowly” tailor any program if it does proceed, ensuring a quick exit for the government.

    Muni Backing

    State and federal lawmakers have pressed the Fed and Treasury to extend support to municipal securities since the Troubled Asset Relief Program, or TARP, was introduced last year. Municipal bond sales tumbled after the bankruptcy of Lehman Brothers Holdings Inc. in September, according to data compiled by Bloomberg.

    California Treasurer Bill Lockyer wrote to Treasury Secretary Timothy Geithner on May 13 asking him to extend the TARP to states and local governments facing “a severe cash flow crunch in the near term due to eroding tax revenues resulting from the current economic downturn.”

    California, which is rated A by Standard & Poor’s, the lowest for a U.S. state, may need as much as $23 billion in short-term borrowing, according to state’s Legislative Analyst’s Office. Voters rejected a package of budget-balancing measures this week, increasing the need for such financing.

    A federal backstop may lower the cost of issuing the securities by about $1 billion, said James Reynolds, chief executive officer at Loop Capital Markets LLC. California sold two short-term note issues totaling $5.8 billion last year, according to Thomson Reuters."(snip)

  3. #3
    Featured Member
    Joined
    Jun 2007
    Posts
    961
    Thanks
    4
    Thanked 17 Times in 17 Posts

    Default Re: If you liked the GM bailout you'll LOVE this. [proposed California Bailout]

    While I agree with what has been said, I also think this is a backdoor to subverting (what's left of) the 10th Amendment. It sure as hell won't be free money.
    Quote Originally Posted by The Snark View Post
    But then I suppose the sort of people who write this kind of crap generally don't allow their opinions to be tainted by things like "facts" and "reality".
    Distortion becomes somehow pure in its wildness
    The note that began all can also destroy

  4. #4
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: If you liked the GM bailout you'll LOVE this. [proposed California Bailout]

    ^^^ well, in fact it would BE 'free' money for the residents of California ... because the otherwise exorbitant cost of insuring newly issued California muni bonds is being 'eaten' by taxpayers in other states. And if California is ultimately unable to repay these new muni bonds (which is entirely possible given that the cost of interest to service these bonds will add to future California budget obligations - which ALREADY cannot be paid even at current year levels) then taxpayers in other states will be on the hook for paying off the principal on bad California muni bonds.

    The tin foil hat crowd would also point out that California muni bonds mostly benefit rich Californians. The reason of course is that California muni bond interest earned by the buyers of these bonds is exempt from both federal and state income tax. Also, the worse that California's credit rating gets, the higher the interest rate California must offer to pay on new muni bonds in order to attract buyers. Under normal circumstances, a rich Californian who chooses to buy a $100,000 California muni bond paying 4-6-8% (tax free) interest also has to worry that the original $100,000 investment could be partially lost should California go bankrupt. However, under the Obama bailout plan, the rich Californian gets to earn his 4-6-8% tax free interest with an absolute guarantee (backed by taxpayers in the other 49 states) that the original $100,000 investment is safe.

    Obviously this little tidbit is an entirely different animal than the gov't's treatment of bondholders in the GM / Chrysler bailouts. Of course the 'fat lady has yet to sing' on that subject as well, since Indiana public employee retirement and investment funds are now in court to block their 'unconstitutional' treatment as GM and Chrysler bondholders.



    Odd that there isn't much coverage of this issue in mainstream US financial media ! Of course this is probably understandable since the 'bond investors' complaining about getting screwed royally are union public sector employees instead of 'evil' hedge fund investors.

    ~
    Last edited by Melonie; 05-21-2009 at 12:56 PM.

  5. #5
    Featured Member
    Joined
    Jun 2007
    Posts
    961
    Thanks
    4
    Thanked 17 Times in 17 Posts

    Default Re: If you liked the GM bailout you'll LOVE this. [proposed California Bailout]

    You're getting too technical. If the fed gives the money, there will be conditions about the way the State operates. de facto fed control.
    Quote Originally Posted by The Snark View Post
    But then I suppose the sort of people who write this kind of crap generally don't allow their opinions to be tainted by things like "facts" and "reality".
    Distortion becomes somehow pure in its wildness
    The note that began all can also destroy

  6. #6
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: If you liked the GM bailout you'll LOVE this. [proposed California Bailout]

    ^^^ actually, it's likely to be the reverse ! California principles such as 20% government employment, subsidized green shoot projects etc. are likely to spread nationally in the same way that California's proposed state CAFE standards were just applied nationally. This 'equalizer' effect will eventually lead to states like Texas, Florida, South Carolina etc. being pressured by the feds to adopt similar spending habits, since their citizens will now be taxed to pay for such spending by 'out of control' states i.e. California, NY, IL etc. Or put another way, the feds appear to be in agreement with the taxation / spending priorities in place in California, and would not mind seeing federal authority used to help promulgate similar taxation / spending priorities being adopted by other states.

  7. #7
    Featured Member
    Joined
    Jun 2007
    Posts
    961
    Thanks
    4
    Thanked 17 Times in 17 Posts

    Default Re: If you liked the GM bailout you'll LOVE this. [proposed California Bailout]

    Well of course, but we were discussing Cali. The fed is going to do all it can to gain control of all the States.
    Quote Originally Posted by The Snark View Post
    But then I suppose the sort of people who write this kind of crap generally don't allow their opinions to be tainted by things like "facts" and "reality".
    Distortion becomes somehow pure in its wildness
    The note that began all can also destroy

  8. #8
    God/dess Deogol's Avatar
    Joined
    Dec 2003
    Posts
    5,493
    Thanks
    120
    Thanked 50 Times in 35 Posts

    Default Re: If you liked the GM bailout you'll LOVE this. [proposed California Bailout]

    The rest of the country is pretty much conservative compared to California. They may be surprised what 500 some representatives and 90 some senators have to say about how they run their state should they take that money.

  9. #9
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: If you liked the GM bailout you'll LOVE this. [proposed California Bailout]

    if the FED runs the California bailout deal, the only 'opinions' involved will be those of Obama, Geithner and Bernanke ! Like the original TARP and original auto bailout, once the senators and congressmen approve the basic deal it will be left strictly up to the Treasury / FED to handle the 'details' of implementation. And just like the original TARP and the original auto bailout, the democrat congressional majority will vote 'yes' (with the cheerleading of Californian Pelosi) - the deal will be set in motion - and the president, treasury secretary, and FED chairman will then 'make up the rules' from that point forward.

    With this precedent set, they will continue to do the same as NY, IL, NJ and a host of other states line up at the same public 'trough' for bailouts of their own. The conspiracy theorists would point out that the end result of all of this could be a divided America, with some 30 high tax high spending states benefitting from a federal bailout, and some 20 low tax low spending states being saddled with the 'tab' for bailing out other states as well as ongoing federal 'meddling' in their own state policies. Ultimately, this could very well result in ...



    ... a (similar) redrawing of the Mason-Dixon line between northern / western high tax high gov't spending states who remain under the existing US federal government, and southern low tax low gov't spending states who choose to secede.

    ~
    Last edited by Melonie; 05-23-2009 at 06:19 AM.

  10. #10
    Featured Member
    Joined
    Nov 2006
    Posts
    950
    Thanks
    1
    Thanked 651 Times in 272 Posts

    Default Re: If you liked the GM bailout you'll LOVE this. [proposed California Bailout]

    That's how USSR collapsed! Several former republics refused to bailout each other. The citizens of the newly proclaimed sovereign states were given a promise of a better life without the control of the "iron fist" of Moscow. What they didn't realize was that the former republics were too interconnected and their separation from each other brought more harm than good. In fact, the economies of the former republics never recovered since the collapse of the Soviet Union in 1991!

    With collapse of their economies came collapse of their societies!

    Think of this: thousands and thousands of people had to leave their homeland in search of jobs. Some made it ok, some were perished (like women who went overseas to work as waitresses only to be sold into prostitution and were never heard from again). Young parents left their children with grandparents at home, and sent money home while working as babysitters, construction workers, etc. overseas and rarely had a chance to see their kids. Many have permanently moved to Europe, Canada, US where were more opportunities, but some "got stuck" in third world countries only to be exploited.

    Think it can never happen here? America has better wake up and fast.
    Last edited by Adelina; 05-23-2009 at 02:46 PM.

Similar Threads

  1. Replies: 4
    Last Post: 02-14-2011, 12:03 PM
  2. a little 'bailout' humor ...
    By Melonie in forum Member Boards
    Replies: 2
    Last Post: 10-05-2008, 12:09 PM
  3. Bailout Explained
    By xanfiles1 in forum Dollar Den
    Replies: 6
    Last Post: 10-03-2008, 12:58 PM
  4. Bailout not passed
    By cherry_sin in forum Dollar Den
    Replies: 36
    Last Post: 10-02-2008, 08:15 AM
  5. Vote against the bailout!
    By luvbuniz in forum Dollar Den
    Replies: 19
    Last Post: 09-27-2008, 11:28 PM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •