California may need a loan!!!

qdognjOctober 3, 2008

"California Gov. Arnold Schwarzenegger, alarmed by the ongoing national financial crisis, warned Treasury Secretary Henry M. Paulson on Thursday that the state might need an emergency loan of as much as $7 billion from the federal government within weeks.

The warning comes as California is close to running out of cash to fund day-to-day government operations and is unable to access routine short-term loans that it typically relies on to remain solvent."

This credit crisis we are experiencing is going to let a LOT of companies/states,etc use the crisis as an excuse for their own mismanagement...I am not saying this is the case with California,but i am 100% certain there will be others taking advantage of this opportunity to pass the blame

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triciae

Qdog, I just saw the CA article on Bloomberg & forwarded it to DH. I posted an article a couple days ago discussing that the largest county in Alabama may be filling BK due to their inability to refinance a large sewer project. The county was unable to make a payment due the day of the article (Tuesday, Wednesday?).

We're in for a very tumultous ride. Frankly, I no longer think the bailout's going to do any good...at least long term. We're too far down the road.

I'm hearing right now on MSNBC that Florida is also reporting an inability to access funds...

/tricia

    Bookmark   October 3, 2008 at 10:14AM
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qdognj

I agree about the bailout doing just about nothing in reality...It will show the government is at "the ready" to support the markets,but not sure if it will actually help...the best remedy for this mess is TIME...

    Bookmark   October 3, 2008 at 10:22AM
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triciae

The noise is growing by the minute...

/tricia

Here is a link that might be useful: Credit Crisis

    Bookmark   October 3, 2008 at 10:54AM
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quandary

I'm also afraid that it may be too late. After the House rejected the bailout vote on Monday, the Federal Reserve's action to pump $630 Billion into the global financial system apparently did not produce the desired result.

According to Bloomberg News , Sept 29:

"The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression. The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed's emergency loan program, will expand by $300 billion to $450 billion. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.

The crisis is reverberating through the global economy, causing stocks to plunge and forcing European governments to rescue four banks over the past two days alone." (Bloomberg)

    Bookmark   October 3, 2008 at 12:26PM
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artemis78

As a Californian, I can certainly vouch for the fact that our budget could use some trimming here and there, but broadly speaking, I think the governor's warning is a very real one. It's a cash flow issue, not necessarily a mismanagement/bloat issue; states are used to juggling financing to make the numbers work out---same challenge some businesses are having with making payroll when they can't access credit for stock purchases. California's also the largest state people-wise (by a long shot---36M to Texas' 24M) and has an annual budget of $145 billion, so $7 billion is just under a month's worth of expenditures, versus smaller states where it sounds like a much larger number.

While I'm not a fan of how many great programs took a hit in our long-overdue-but-finally-passed budget for this year, I do respect the governor's efforts to try to balance the books and make the numbers work. I expect his warning to the feds today is just a harbinger of more to come from other similarly-strapped states that simply haven't spoken up yet. (That said, the CA housing market also took a huge hit from the recent crash, which has a dramatic effect on county and city funding for programs---puts the state in a tight spot when you're talking about nursing homes and school kids....and yes, they really are; those facilities have already had funding frozen once this year while the budget was in limbo, and people were really caught off guard, since public facilities tend not to have rainy day funds of any sort.)

Just food for thought.

    Bookmark   October 3, 2008 at 3:28PM
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qdognj

Once upon a time, many companies and states ran their budgets without the need for short term funding to pay the bills or make payroll..But playing the "float" has become the norm,and the ensuing problems have arrived.

    Bookmark   October 3, 2008 at 5:35PM
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mfbenson

And the slippery slope slips a little further... "If a bailout is good enough for wall street, its good enough for California!".

Argh. Whatever happened to living within your means?

    Bookmark   October 5, 2008 at 11:57AM
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chisue

I'd guess Arnie is smart, getting on the bus first.

    Bookmark   October 5, 2008 at 12:49PM
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sheilajoyce_gw

In many tax funded agencies, the taxes come in during the year in spurts, and so the agency needs to get a loan to last till their funds come in. At that point, they pay off the loan and continue with their budget year. Not at all unusual with public agencies. I imagine that the state of California is no different.

    Bookmark   October 5, 2008 at 5:07PM
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