Sunday, February 28, 2010

Jamie Dimon: California is a Greater Risk than Greece

President Obama's favorite banker is real worried about California.

Dimon told investors at JPMorgan's annual meeting that "there could be contagion" if a state the size of California has problems making debt repayments, reports James Quinn for UK's Telegraph.

"Greece itself would not be an issue for this company, nor would any other country," said Dimon. "We don't really foresee the European Union coming apart." Dimon did not explain how he expects the PIIGS to be bailed out. His focus is clearly not on the PIIGS. He said that JP Morgan Chase and other US rivals are largely immune from the European debt crisis, as the risks have largely been hedged.

California is a different story. Remember, he was gifted Washington Mutual last year, which has a huge California presence.

The California budget deficit will likely come in at between $20 billion and $3o billion. Where's California going to raise that kind of money? Dimon is correct to be nervous. Will he get Obama to put the squeeze on Bernanke to bail out Cali?

By the end of March, California's cash will be down to roughly a billion dollars, after that it goes negative.

Stay tuned.

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