If AIG was too big to fail, how about the world's eighth-largest economy? Thought it had already failed...
In a move with only one modern-day precedent, California Gov. Arnold Schwarzenegger and Democratic lawmakers are pressing the Obama administration and members of Congress for federal loan guarantees to help the state out of a desperate, multibillion-dollar jam. Only if every US citizen gets to vote in California. Declare us de-facto registered voters in State elections.
California is not asking for cash, like the tens of billions given to AIG, General Motors or Morgan Stanley. Instead, the state with the worst credit rating in the nation is asking that Washington act as a sort of co-signer on the state's borrowing, to be backed up with money from the Troubled Asset Relief Program. "We're not asking for Real Money, only Obama Money. Which is the same thing, actually." How can one be a "sort-of" co-signer?
California leaders say that would make it easier and cheaper for the state to borrow money on the bond market, reducing the interest rate by as much as half and saving taxpayers hundreds of millions of dollars. But costing the rest of us billions of dollars. There are "administrative fees" you see.
The Obama administration has responded cautiously to the idea, and members of Congress from other states worry that it would put the federal government in the business of backing municipal bonds - a job traditionally held by investment banks. There is reason to worry. If the Feds have to bail out California won't it be a de-facto takeover of a State?
They worry also that the U.S. government could overextend itself and risk its triple-A credit rating if California and other states or cities in distress start coming to Washington hat in hand. Hey, if Daddy Obama is handing out cash to California, why not us?
But California leaders warn that without assistance from Washington, the nation's most populous state could fall deeper into a financial abyss and resort to even bigger spending cuts and layoffs, becoming a drag on the economic recovery of the nation as a whole. Bullshit. If California has to cut State spending I really don't believe that would be a drag on Tennessee. Scare tactics.
"There's simply no better stimulus than guaranteeing state and local bonds, particularly those that are being used to get through the crisis and avoid layoffs," said Rep. Brad Sherman, one of 15 Democrats in California's House delegation who signed a letter earlier this month asking for the federal loan guarantee. So borrowing and spending more money that the rest of us will have to pay back is a good thing? For California, for the rest of us not so much.
Plus, supporters of the idea note that Washington stands to make a profit from loan fees as it did after bailing out New York City in 1975, a move that brought the city back from the brink of ruin. "'U.S. to Cal: Drop Dead!'"
Because of a steep drop in tax revenue, Schwarzenegger and lawmakers are struggling with a projected deficit of $24 billion, or more than a quarter of the general fund. So cut spending. It's what I have to do when my income drops.
Come this summer, California will need to borrow money simply to pay for day-to-day operations. The state does that routinely every year. But this time, the amount California must borrow is a lot higher. And the tight credit market and questions about California's ability to repay are likely to make borrowing extremely expensive for the state. Thereby increasing chances that any money we cosign will be gone with the wind...
"We are not asking for a bailout," said state Assembly Speaker Karen Bass, a Los Angeles Democrat. "It's... ummm... something else."
"We're asking for the federal government to step in where commercial banks can't this year because of the crisis within the financial industry." And that differs from a bailout precisely how?
So far, no other state has asked for such aid. States such as Arizona and Nevada have proportionately larger deficits than California but do not face the same cash-flow crunch. Michigan is in distress too, but stands to benefit from the Obama administration's rescue of the auto industry. Getting theirs through the back door, so to speak...
Treasury Secretary Timothy Geithner told a House committee last week that he did not have authority to use financial rescue money to help state governments. But he did not rule out assistance. He said California's request would have to be decided in Congress. The idea's prospects in Congress are uncertain. But California has far more clout in Washington than any other state, with the nation's largest congressional delegation and a San Franciscan, Nancy Pelosi, as speaker of the House. Queen Nancy will put a lot of pressure on House members to do this. If California goes tits up she could loose her elite status.
Democratic Rep. Barney Frank of Massachusetts, chairman of the House Committee on Financial Services, said he supports legislation to help California and other cash-strapped cities. California is a city?
"I think if the federal government can go to the aid of major financial institutions, particularly when state and local governments face short-term liquidity issues, I think helping them out is very relevant," Frank said. As long as I get a piece of the pie.
California already has cut $15 billion and raised taxes by nearly $13 billion this year. Schwarzenegger has proposed cutting nearly $20 billion more, including eliminating California's welfare-to-work program and getting rid of health insurance for 930,000 poor children. Caliphornia's also chasing much of its business out of the state, thereby dumping its revenue streams.
Other members of Congress worry about the precedent if the government agrees to guarantee California's borrowing. Rep. Darrell Issa, a California Republican, said other states would be certain to ask for help, too, and he warned that the U.S. government's credit rating could be downgraded as a result. But it's for the Children!
In 1975, President Gerald Ford rejected a similar plea from New York City, prompting the not-entirely-accurate headline "Ford to City: Drop Dead." With the city on the verge of bankruptcy, the president ultimately relented, signing legislation for federally guaranteed loans. The loans have since been repaid with interest. California is just as likely to repay its loans, said Matt Fabian, a bond analyst at Municipal Market Advisors, based in Concord, Mass. He and others noted that the state has never been late on a payment, and is always collecting revenue and has the option of raising taxes. "California's not going to default," Fabian said. If it wasn't likely they would, their credit rating would be better and they wouldn't have to turn to the Feds. If they've never missed a payment then what's the problem? Get back to us when you're a year behind ...
Except they don't really have the option to raise taxes. They've already pretty much raised them as high as can be.
Posted by: Deacon Blues ||
05/29/2009 00:00 ||
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" said state Assembly Speaker Karen Bass, a Los Angeles Democrat. "We're asking for the federal government to step in where commercial banks can't this year because of the crisis within the financial industry."
So ya see the problem has nothing to do with mismangement after all. Everything would still be all California Dreamin if it wasnt for that damn Wall Street Greed.
Until California tells Obama that the state doesn't have cash to pay the loans and will layoff his union supporters unless he makes good on his guarantee. California's revenues will not recover until hyperinflation kicks in.
No more taxes. If you can't manage to find 5000 drones in the 250,000-strong state workforce, I can help ya. Start with about eight of the Governator's assistants at 100K+ per annum. Then move on to the Department of Redundancy Department.
Sources told The Bulletin that there is internal dissension in the Department of Justice (DOJ) about a voter intimidation case from last year's presidential election. Obama appointees did not want to proceed with the case, while the career prosecutors did. The incident occurred in Philadelphia and involved the New Black Panther Party for Self-Defense (NBPPSD).
We watched that here at Rantburg at the time.
The DOJ filed a lawsuit under the Voting Rights Act against the NBPPSD and three of its members alleging the defendants intimidated Philadelphia voters during the Nov. 4, 2008 general election. The action was filed in January before President George W. Bush left office. The complaint, filed in the United States District Court in Philadelphia, alleged that on Election Day, Nov. 4, 2008 in Philadelphia, NBPPSD members Samir Shabazz and Jerry Jackson were stationed at the entrance to a polling location at 1221 Fairmount Avenue, wearing the uniform of the organization. It also states Mr. Shabazz repeatedly brandished a "police-style baton weapon."
The complaint said NBPPSD Chairman Malik Zulu Shabazz confirmed that the placement of Messrs. Shabazz and Jackson was part of a nationwide effort to deploy NBPPSD members at polling locations on Election Day. The Justice Department sought an injunction to prevent any similar future actions by NBPPSD members at polling locations. "Intimidation outside of a polling place is contrary to the democratic process," said Acting Assistant Attorney General Grace Chung Becker at the time. "The Department takes allegations of voter intimidation seriously."
None of the defendants responded to the lawsuit. Instead of immediately filing for a default judgment as is the normal procedure, sources told The Bulletin the DOJ asked for and received an order from the court providing an extension of time to file. Specifically, they asked the court to give them until May 15. But on May 15, DOJ changed its mind again. Rather than a default judgment, the DOJ filed a notice of voluntary dismissal of the lawsuit for two of the defendants. This included Mr. Jackson, who identified himself to police as a member of the Democratic Committee in the 14th Ward. He also produced credentials to that effect. DOJ only asked for a default judgment against one defendant, Samir Shabazz, which was granted on May 18. But sources say the proposed order for the default judgment asks for none of the usual conditions the Justice Department would want, such as keeping Mr. Shabazz away from any polling locations for a set number of years into the future.
Hans von Spakovsky is a former career Counsel to the Assistant Attorney General for Civil Rights. He thinks the inaction by the Justice Department is unprecedented. He told The Bulletin that the dismissal by Justice, with no notice on the Justice Department press site, particularly against an organization listed as a hate group by the Southern Poverty Law Center, is a horrible miscarriage of justice. He said DOJ has failed in its duty to enforce voting laws. He is outraged by the action. "It is absolutely unprecedented for the Justice Department to dismiss a lawsuit after the defendants failed to answer the suit and are thus in default," he said.
Mr. von Spakovsky said that the NBPPSD's lack of response was the legal equivalent of an admission of all the allegations made about the defendants' organized effort to threaten and intimidate voters. "And dismissing an individual who was a local Democratic party official who defaulted by not answering the complaint smacks of the worst sort of political partisanship," he said. "It is completely contrary to all of the promises that Eric Holder made when he was confirmed to be Attorney General."
Vito F. Canuso, chairman of the Philadelphia Republican City Committee, said that what the Justice Department did is tantamount to filing a lawsuit for $100,000. Then when they win the suit for $100,000 they ask for $10,000. Neither the Justice Department nor the Republican National Committee responded to requests for comment.
Yeah, if it were any other ethnicity blocking the polls, the feds would have come down on them like a ton of bricks. But there are two sorts of justice in America: one for the differently advantaged, and one for Those Bad People (i.e. regular folks).
ricketson - that was pathetick, almost to the point of inducing gut wrenching nausea. No history of violence against voters? Oh, so voter intimidation is just peachy then huh?
Their race based hatred is every bit as egregious as that espoused by the KKK. Thankfully, the New And Improved Black Panther Party was denied their chance to engage in said violence thanks to alert citezenry.
Posted by: Rex Mundi ||
05/29/2009 14:40 Comments ||
Ricketson - This is America, we don't convict groups based on shared history nor do we convict members for the history of groups with which they are affiliated. We convict individuals for their actions and *ONLY* for their actions.
The point I was trying to make (and failed apparently) is that both the Black Panthers for Imtimidation and the KKK are both organization aligned pretty much with the DEMOCRATIC Party.
Try to imagine a polling place with a BP member (in full uniform and billyclub) standing right alongside a KKK member (in full -er- hooded sheet) - both there to keep out anyone who might vote against the DNC.
A multi-volume chronology and reference guide set detailing three years of the Mexican Drug War between 2010 and 2012.
Rantburg.com and borderlandbeat.com correspondent and author Chris Covert presents his first non-fiction work detailing
the drug and gang related violence in Mexico.
Chris gives us Mexican press dispatches of drug and gang war violence
over three years, presented in a multi volume set intended to chronicle the death, violence and mayhem which has
dominated Mexico for six years.