NYT reports:
California’s state treasurer, Bill Lockyer, today denounced ongoing efforts to establish a new framework for states to restructure their debts, saying no state wanted or needed to declare bankruptcy.Cash deferments and the issuing of more IOU's, oh yeah, the finances for the state of California are just chill, man.
“It’s a cynical proposal, intended to incite a panic in response to a phony crisis,” Mr. Lockyer said in a conference call with journalists. “Killer bees, space aliens, and now it’s the invasion of the bankrupt states.”...
The treasurer also elaborated on the possibility that California might have to issue i.o.u.’s to pay its bills this spring — as it did in 2009 — if the state legislature fails to produce the severe austerity that Gov. Jerry Brown has requested...
He said officials would be looking for cash expenditures to defer, depending on how quickly new tax dollars start arriving this spring and how aggressively the legislature and the governor close the budget deficit.
“Then, the next option, if you run out of deferrals, is to issue i.o.u.’s,” Mr. Lockyer said. “It’s a possibility. It’s not one that anyone wants to do. It’s at the bottom of the list of choices. But it is on the list.”
Hmmm...so defaulting on your debt isn't pretty much the same thing as bankruptcy? I wonder how many merchant will be willing to continue to provide services in exchange for IOU's...
ReplyDeleteAs long as the Fed Govt doesn't start to bailout states, I don't care if IOUs are issued. Doing bailouts will only tighten the govts grip around our necks
ReplyDeleteIn the business world IOU's are called NSF checks and are typically a sign of insolvency. Of course, even a company that cannot pay all of its bills can usually pay some of its most critical bills by diverting money from other creditors. The newly popular safety net argument seems to be that no matter how bad it gets with the states, the bond holder will still get paid--but maybe no one else will.
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