California may need $7 billion federal loan

[nullterm]

http://www.cnn.com/2008/POLITICS/10/03/california.loan/index.html?eref=rss_topstories


(CNN) -- 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.

California is running short on cash, Gov. Arnold Schwarzenegger warns in a letter.

Schwarzenegger gave the warning in a letter sent Thursday to U.S. Treasury Secretary Henry Paulson.

The letter, published in Friday's Los Angeles Times, was written on the eve of an expected vote in the U.S. House on the federal bailout of the financial system.

"The federal rescue package is not a bailout of Wall Street tycoons -- it is a lifeboat for millions of Americans whose life savings, businesses, retirement plans and jobs are at stake," Schwarzenegger said.

California State Treasurer Bill Lockyer issued a statement a day earlier saying because of the national financial crisis, California "has been locked out of credit markets for the past 10 days."

"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 Treasury for short-term financing," Schwarzenegger wrote.

The governor warned that a number of states are facing the same cash flow crunch this month, but that his state is "so large that our short-term cash flow needs exceed the entire budget of some states."

Schwarzenegger said his state would attempt to sell "$7 billion in Revenue Anticipation Notes for short-term cash flow purposes in a matter of days."

Lockyer said that unless the national economic crisis subsides and California can secure private short-term loans "the state's cash reserves would be exhausted near the end of October."

"Payments for teachers' salaries, nursing homes, law enforcement and every other state-funded service would stop or be significantly delayed," Lockyer said. "And California's 5,000 cities, counties, school districts and special districts would face the same fate."

The federal bailout for the financial system is expected to return to the House for a vote Friday after it passed the Senate Wednesday night.

The legislation would permit the Treasury to buy up $700 billion of bad assets -- most of which are backed by mortgages -- from banks in an effort to clean up their balance sheets so they can resume lending.
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The credit crunch, a decline in state tax collections and a delay in adoption of a state budget have combined to aggravate California's cash flow troubles.

"The economic fallout from this national credit crisis continues to drain state tax coffers, making it even more difficult to weather the continuation of frozen credit markets for any length of time," Schwarzenegger said.

[Calanen]

Schwarzenegger said his state would attempt to sell "$7 billion in Revenue Anticipation Notes for short-term cash flow purposes in a matter of days."


Good luck with that.

I'll take a cool bill of Cali IOUs please Governator.

[Winger]

Money 101: When you spend more than you take in guess what?

Our government sucks on almost all levels. Eliminate entitlements and the Governators problems will be solved.

Put the prisoners in tents with sleeping bags in open fields surrounded by fencing. Deny benefits to illegals and sell San Fransisco to China(heard that somewhere today). :)

He can start there with cost cutting.

[Dispatcher]

Clean; pay up man. Your tax evasion has lasted long enough.

;)

[boone]

"boone may need $7 billion Federal loan"
Title fixed free-of-charge.

[Dispatcher]

"boone may need $7 billion Federal loan"
Title fixed free-of-charge.


He's good for it. Trust me.

[AmandlaEwetu]

Simple solution -put up taxes to European levells (but keep spending American)

problem solved-would work in Europe aswell

[LRPV]

So if California which I understand has the largest of the US state economies is stuffed, how are the less economically advanced states?
Less exposure?

[Noble713]

Interesting. I've occasionally wondered about the conditions necessary for a successful revolution to take hold in a first world nation, especially one with an extensive and competent law enforcement apparatus.

I concluded that undermining people's faith in the government's ability to provide essential emergency services (police and fire, basically) would be a good start. However, attacking these providers outright requires an unrealistic quantity of resources (financial, material, and human).

Of course, we Americans are an inventive lot. By spending more than we earn at every level of our society, we now find ourselves short on cash when the inevitable rainy day arrives. Our government is running the risk of not being able to provide any service *at all*. We've crippled our country all by ourselves, and with the only shot fired being that 90yo woman who tried to commit suicide after foreclosing.

Out-fricken-standing.

[Flagg]

State financial issues are a bit like a canary in a coalmine.

The inability of individual states to print money exposes their problems more quickly individually than the combined federal whole.

State and local government insolvency and bankruptcy threats will become more commonplace.

State and local retiree pensions are DOOMED.

The loss of jobs and income from current state/local workers who will get chopped in the next few years combined with the loss of income of state/local retirees will further accelerate the pressure on declining residential rest estate, soon to be followed quickly by commercial real estate, as well as the businesses inhabiting commercial RE.

State/local/property/sales taxes will be at serious risk of significant increases in order for state/local government to continue providing essential services as well as keep retired state/local employees from literally becoming homeless.

Few states will be relatively unscathed........once inflation kicks in again and strategic commodities explode in price again.....local economies dependant upon buoyant commodity prices will be able to cushion the blow to an extent.

But exurb communities with no real substantial localized economies dependant upon inexpensive energy for long commutes will suffer horribly.

I don't like coming across as a wannabe know it all.......but I truly believe we are facing the biggest single issue to impact our lives......and it's mostly going to be in a negative way.

Educate yourselves.......

Get rid of debt......live well within your means, even if it sucks........some serious pain is coming.

Just my 0.02c........and I'd bet my last 0.02c on it.

[Flagg]

So if California which I understand has the largest of the US state economies is stuffed, how are the less economically advanced states?
Less exposure?

Just because California is the biggest state economy, doesn't mean it's the most "advanced".

In fact an argument could be made that California is far from being the most "advanced" state in the nation.

California, Florida, and Nevada....in my opinion..... are the three states worst affected by the residential and commercial real estate bubble.

State budgets, seriously dented by rapidly declining state revenue, are a shambles.

THINK about the severity of the problem.

A state...no matter how mismanaged....should be able to access credit from multiple sources pretty much whenever.....why? Because it can ALWAYS raise taxes and revenue(theoretically)....it's the safest bet a bank can make.....states can't run from the repo man.................yet banks ain't coughing up the dough.

That's like a 12 on the 1 to 10 Holy Sh!t scale

[SOG]

State/local/property/sales taxes will be at serious risk of significant increases in order for state/local government to continue providing essential services as well as keep retired state/local employees from literally becoming homeless.



Wonderful time to start a business. I was looking at the taxes I would have to start paying for that. **** me...

[Will938]

So if California which I understand has the largest of the US state economies is stuffed, how are the less economically advanced states?
Less exposure?

Last I checked Texas had a 10 billion dollar surplus.

[brainplay]

Last I checked Texas had a 10 billion dollar surplus.

Dude! Shut up! If those crazy Kaliforni-stan hippies find out they'll all try to migrate here. We've got enough whiney bastards in Austin and here in Houston. :bash:

[LRPV]

A state...no matter how mismanaged....should be able to access credit from multiple sources pretty much whenever.....why? Because it can ALWAYS raise taxes and revenue(theoretically)....it's the safest bet a bank can make.....states can't run from the repo man.................yet banks ain't coughing up the dough.

That's like a 12 on the 1 to 10 Holy Sh!t scale




Yes, I guess that is a point to consider.

Keep up the quality commentary, you make a lot more sense than the talking heads on my tv. thanks.

[Flagg]

Wonderful time to start a business. I was looking at the taxes I would have to start paying for that. **** me...

Actually it is!

Or it will be in the near future.

Historically, some of the greatest innovations in the second half of the 20th century can be attributed to businesses started during/after a bad economic hit.

There's LOTS of people working for others right now with world changing ideas who will be out of work in the next few years :(

The good news is that some of them will be crazy enough to bet everything( and then some) on developing their ideas on a shoestring for the chance to change their piece of the world...and treat THEIR employees better than they were treated when they worked for others. :)

In my Jaques Costeau voice: "And the circle of life continues"

[nullterm]

Yeap.

From another point of view, for all the people losing money on stocks taking a plunge, there's others who buy up the cheap stocks that will rebound and make them a profit.

[Flagg]

Yeap.

From another point of view, for all the people losing money on stocks taking a plunge, there's others who buy up the cheap stocks that will rebound and make them a profit.

Anyone who bought Microsoft during the 87 crash and eventual recovery would be an eleventeenzillionaire.

However.......the odds of catching the next Microsoft instead of getting stabbed to death by some of the thousands of falling share "knives" are incredibly low.

Most people who haven't been around long tend to think there are really only two investment classes:

real estate

publically traded shares


There are also:

bonds

commodities

precious metals

and lots of guns :)

to name but a few.......

You do make an excellent point......that for all the pain being suffered right now......the people that stay calm, cool, and collected...and sacrificed and saved.....could do VERY well out of this in 10-15 years time.

[PrinzEugen]

...........could do VERY well out of this in 10-15 years time.

Sorry for the OT, but I´d like to be one of the above. Thing is that I, or rather we, just sold our company so for the first time in 15 years I´m now employed with some cash to spend. Stock is my choice of route, but when and what to buy, now that is the question.
Flagg, you seem to be in the know, what would you do?
I´ve done some deals in shares but my profession is in the mechanical workshop area, so the stock exchange is not my normal hunting grounds.

[Kilgor]

Im not sure of commodities and metals, Flagg.

They have taken a serious hit because of the slowing economy.

I think the safer bet is bibles and guns in small town america ;)

[Flagg]

Sorry for the OT, but I´d like to be one of the above. Thing is that I, or rather we, just sold our company so for the first time in 15 years I´m now employed with some cash to spend. Stock is my choice of route, but when and what to buy, now that is the question.
Flagg, you seem to be in the know, what would you do?
I´ve done some deals in shares but my profession is in the mechanical workshop area, so the stock exchange is not my normal hunting grounds.

Best thing I can do is strongly suggest and encourage you to educate yourself.

What works for me may not work for you.......

Hell, a spider monkey pointing at stock symbols could quite possibly result in far higher investment performance than I'm capable of :)

Here are some worthwhile time wasters:

iTulip.com <-----"EJ" Eric Janszen has been spot on for 8-9 years.......his thoughts going forward are scary

berkshirehathaway.com <----shareholder letters by Warren Buffett and Charlie Munger

jimrogers.com <------his books are excellent and he's so spot on with his big picture predictions have been crazy accurate thus far

I don't have any connection to Warren Buffett or Charlie Munger, but I have had some personal communication with both EJ and Jim Rogers in recent years.....their comments to me have helped me prepare for what I believe is coming.

In a nutshell.....EJ thinks cash is king for now, but once this period of disinflation finishes...it's to the moon for commodities.....some currencies(including the US Dollar) will be devastated, and this recent brief period of individuals moving money freely around the world will be over........basically the bad old days of currency controls...he likes agricultural commodities, precious metals, and energy for the reinflation

In a nutshell.....Jim Rogers believes the US Dollar is doomed and that China and to a lesser extent India will regain their previous large % of global GDP. Jim Rogers likes China and REALLY likes commodities.

In a nutshell....Warren Buffett I'm losing faith in based on the difference between his comments and actions......I try and follow his actions.....recent actions include: getting out of the bank deposit insurance business(above FDIC limits)...which may signal his thoughts that banks are at risk of failure, he's also begun to invest in distressed blue chips like Goldman and GE....personally I think Buffett is premature in his buying.

Again...don't listen to me........I could be homeless and crazy logging on from a free computer in a public library...or trying to scam you from Nigeria :)

What I do know is educate yourself as best you can and tread cautiously.

You are in a great position when cash is king.....but be on the lookout for warning signs of serious inflation down the road where you may want to deploy that cash.

Again, don't listen to me...but good luck

[Flagg]

Im not sure of commodities and metals, Flagg.

They have taken a serious hit because of the slowing economy.

I think the safer bet is bibles and guns in small town america ;)

They have certainly gotten hammered....like everything else.

But if you follow Jim Rogers, the theory is that commodities will rebound the fastest and the highest...likely due to inevitable inflation to try and re-inflate real estate.....commodities will move higher and faster than real estate by far....in my opinion.

And that's commodities themselves, not necessarily commodity producers that are traded on sharemarkets.

Oil under $90 looks very appealing out beyond the next 12-18 months

Until we get some clarity cash is king in my opinion.

But what do I know......I just write what the voices in my head tell me to :)

We're now looking at a fullscale spillover into Europe.

[Connaught Ranger]

7 billion!!! is that the current cost of rebuilding Arnie

I'll be back.

[PrinzEugen]

Thanks for your input Flagg, its appreciated. Given how volatile the stock exchange is right now maybe a Nigeria letter is the way to go after all:)