California may seek Treasury financing

SAN FRANCISCO (Reuters) - California Gov. Arnold Schwarzenegger has told U.S. Treasury Secretary Henry Paulson that the most populous U.S. state may need the federal government to buy $7 billion of debt the state is unable to sell due to weak credit markets- and that California may not be alone.

The $7 billion issue of revenue anticipation notes would raise cash to tide California over the near term until it gets expected revenues, but the plan to sell the debt is in peril because the municipal debt market is frozen, State Treasurer Bill Lockyer said earlier this week.

“This is not a normal year,” said Lockyer spokesman Tom Dresslar on Friday, adding that the state was preparing the issue but that markets were in turmoil: “The paralysis lingers.”

The municipal bond market, where California hopes to sell its short-term notes, has all but frozen up over the past three weeks as buyers have been scarce and tax-exempt yields have skyrocketed. Few deals have been priced, while scores of issuers such as states, hospitals, school districts and others, have postponed their bond sales awaiting a market turn around.

How do you feel about this?

California got itself into this mess, let them get themselves out. I oppossed the Wall Street bail out, I oppose giving money to California.

My family and I feel the same way. :thumbsup: :thumbsup:

I wonder what is the price for a credit default swap on California’s debt.

The price for New Jeresy’s credit default swaps doubled.

Instantly, investors everywhere were risk averse, and the price of a five-year swap on New Jersey’s debt jumped to $84,000 for $10 million in bonds. For the buyer in mid-July, that is a jump in value of more than 100 percent in just two months

It seems to me that it may be time for our government and our families to start living within their means and quite borrowing for everything. Perhaps we should be able to pay for something before we buy it. Now I know we all need to borrow to buy something like a haouse or car but we don’t need to borrow in order to buy a TV or airconditioner. If it costs less than $5,000 we should save for it, not charge it and then pay the minimum credit card payment each month. Maybe government should stop spending on day to day things until they can afford them. I know you need to finance things like new buildings and roads but road/building maintenance, social programs, police/fire, teacher pay, etc. should be on a cash basis.

Also, does anyone know the yield curve for California bonds? Presumably, it has a steep yield curve because this represents pessimism and uncertainty in the states finances.

I want to know what the market has to say about the credit risks of California, and other states. I suppose “socialism” wouldn’t be popular anyone. I suppose taxes will increase eventually.

As perhaps the “bluest state” of all other than Massachussetts, California is okay with tax increases promised by Obama. As far as I am concerned, they can put their money where their mouths are and tax themselves for this one. I see that Mass. is also there with its hand out now. They are so eager to tax the rest of us, let them tax themselves.

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