| By Ken - Oct 3rd, 2008 at 2:22 pm EDT |
| Also listed in: Blue Biz |
Categories: Economic Fairness & Security, Effective & Ethical Government, Corporate Accountability / Workers' Rights, Budget Priorities, All Network Posts: Front Page
Just last week, Gov. Bill Owens [Ritter- My mistake as noted by Kevlar Liberal] has imposed a state hiring and new construction freeze. Raj Chohan, via AP, reports:
Saying uncertain economic times require tough measures, Gov. Bill Ritter on Thursday announced a freeze on hiring new state employees and ordered a halt to new construction....
Today Jim Christie, Reuters News, reports:
SAN FRANCISCO (Reuters) - California Gov. Arnold Schwarzenegger has told Treasury Secretary Henry Paulson that the most populous U.S. state may need to turn to the federal government for short-term financing because a $7 billion sale of notes may be foiled by weak credit markets...
"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, adding he supports a federal emergency financial rescue plan.
California State Treasurer Bill Lockyer said on Wednesday the planned note sale was at risk from the uncertainty gripping financial markets and the lack of a response to it by the U.S. government.
"Basically no credit is available -- zero today," the treasurer of the biggest U.S. issuer of municipal debt told Reuters in a telephone interview....
Sean Paul Kelly, The Agonist, writes:
Look, if the States can't function we're all hosed. And the so-called Congressional bailout does nothing to address these issues. It's not even remotely close to a 'clear resolution.' Even Krugman says as much, "Aid to cash-strapped state and local governments, which are slashing spending at precisely the worst moment, is also a priority."
Paul Krugman sounds the alarm:
The financial and economic news since the middle of last month has been really, really bad. And what’s truly scary is that we’re entering a period of severe crisis with weak, confused leadership...
How bad is it? Normally sober people are sounding apocalyptic. On Thursday, the bond trader and blogger John Jansen declared that current conditions are “the financial equivalent of the Reign of Terror during the French Revolution,” while Joel Prakken of Macroeconomic Advisers says that the economy seems to be on “the edge of the abyss."...
I hope that it [The rescue plan right now being debated in the House - Ken] passes, simply because we’re in the middle of a financial panic, and another no vote would make the panic even worse.
As Krugman points out that one of the key factors in the current panic is that Sec. Paulson allowed Lehman Brothers to go bankrupt. Why? GJMandinka, in the comments section of HuffingtonPost.com article, notes:
There has been a long-time rivalry between Lehman and Goldman Sachs. Hank Paulsen was CEO of Goldman Sachs before he took his current job. Big surprise that he decided to "draw the line" at Lehman....
When Krugman pointed to Lehman Brothers as being a "roach motel" the New York Times article he refers to is this Landon Thomas report:
...
Two weeks after Lehman spiraled into bankruptcy, hedge funds that did business with the Wall Street bank are still fighting to get their money out of the firm. For some, it has become a life-or-death struggle.
Big funds like GLG, Harbinger, Amber Capital and Elliott Associates have varying degrees of exposure to Lehman Brothers.
But even a $6.2 million fund run by students at the Darden School of Business at the University of Virginia has been caught up in the bankruptcy. The fund, like its larger counterparts, used Lehman as a prime broker, and no longer has access to its money....
For a definition of hedge funds go here. For a total dollar amount of hedge funds go here. For tax and regulation (or lack of) information about hedge funds go here. Another ticking time bomb.
Flooding the international market with over 600 billion USD as Fed. Chair Benanke did hasn't helped to loosen credit because financial institutions are hoarding their money now.
Taking over AIG, Fannie Mae and Freddy Mac, while engineering the consolidation of U.S. financial institutions through the use of a little known regulation from 1933 by Bernanke has not helped regain trust in the financial community although it has cost another 600 billion+ USD.
Now the House is considering a 700 billion USD injection of liquidity that will only be a stop gap short term "finger in the dike" or prayer measure because Paulson and Bernanke have not thought out real solutions to these problems that are facing America and the world.
What does this mean...not a religious armageddon but a financial one if trust cannot be restored through governmental intervention in the capitalist financial system.
Comments are closed for this post.
Secondly, comparing the situations of California and Colorado's state budgets is a stretch at best - Colorado cannot operate on a deficit, while California does all the time.
Oddball commentary from Huffingtonpost.com does not count as informed analysis on the qualifications or motivations of the Treasury Secretary.
Hedge funds have fuck-all NOTHING to do with commercial and consumer credit, despite how many phoney links you imbed in your rants.
But overall, you might actually be getting the point - if consumer and commercial credit are cut back in this country, at a certain point the whole thing does collapse and burn.
States are included in this, since they do agree to make overnight loans to banks in return for some fractional interest on the loan - when the banks can't afford to do that, then the States lose that income.
I'm so glad all of you fought the original bailout bill, 'cause instead, we got one with 100 Billion of bullshit tax cuts and pork that does basically the same thing.
Remember it was the collapse of a Bear Stearns hedge fund that caused the collapse of that company.
Dr. Thomas Palley writes in the Financial Times:
This parallel banking system financed vast amounts of real estate lending and consumer borrowing. The system (which included the likes of Thornburg Mortgage, Bear Stearns and Lehman Brothers) made loans but had no deposit base. Instead, it relied on roll-over funding obtained through money markets. Additionally, it operated with little capital and extremely high leverage ratios, which was critical to its tremendous profitability. Finally, loans were usually securitized and traded among financial firms.
Read the rest here Link
...from a rambling collection of cross posted blogs that are almost impossible to follow.
...from wondering why you have recently forgotten how to use the extended post text.
...from the mistaken belief that anyone cares how many differnet blogs you read each day and your skill at cut and paste.
Let's all try the technique of make your point up front, support it, and move background information and other superfluous embelishments to the extended text.