California Tries To Find A Way Out Of The Box

California Governor Arnold Schwarzenegger appears to be heading back to the drawing board in order to come up with some plan to see the state through its cash crunch. The Governator had been making the rounds in Washington this week but evidently came away empty handed.

After the resounding defeat of the various initiatives that were cooked up to get the state out of hot water, it looked as if the next best solution was going to be a $6 billion issue of short-term notes to get the state through the summer. Since the prospects of the credit markets forking over that kind of money to California are as close to nil as you can get, the plan seemed to be to get the other 49 states to guarantee the issuance via a federal backstop.

These days bailouts the inclination of Congress to vote for any more financial rescues is about as high as their desire to see Guantanamo inmates transferred to their districts’ penal institutions. In other words, no more stinkin’ bailouts. The administration knows the score and isn’t about to walk into that minefield unless they have no other choice.

The other hard reality is that while California may be among the worst of the destitute state and municipal borrowers it is not the only one facing financial Armageddon. Help out the Golden State and watch the line form outside the Capitol and how are you going to say no to the next one.

So having been rebuffed by its citizens as well as the feds, California now has to maybe face up to its problems and work out a real solution. Can it be done? I’m guessing that there’s an outside chance they can pull it together. They may have to skip a payment here or there and scrounge for some new tax revenue from somewhere but given their resources it’s not impossible.

If they can’t, it’s going to be ugly. Obama won’t let that many electoral votes go down the drain so if his back is pushed to the wall he has no choice but to cave. California, however, might not like the price that comes with their rescue.

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About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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