Monday, August 31, 2009

CNBC: Democrat Utopia of California is "the nation's worst credit risk"

Two decades of unchecked liberal leadership have led California straight into the crapper. The state is so financially desperate it "is borrowing money to repay the money it is borrowing which was used to repay some IOUs".

Sounds Madoff-esque to me.

And who would loan funds to "the nation's worst credit risk"? To the capitol of the country's mortgage fraud crisis? To a primary instigator of the illegal immigration and public sector union debacles?

Officially, it's JP Morgan. But since you and I had to loan JPM the money for it to remain solvent (since repaid), perhaps it's the collective.

JP Morgan Chase is lending a hand to the nation's worst credit risk.

California State Treasurer Bill Lockyer announced that the banking giant is lending the state $1.5 billion to help it pay off IOUs... The terms are very favorable to California, as the loan carries a 3 percent annual interest rate, lower than the 3.75 percent rate the state is paying on the IOUs. Also, Chase is not charging any fees.

The loan will allow California to start redeeming IOUs a month early, beginning Sept. 4. That will also be the same day California will stop issuing IOUs. A total of 414,000 IOUs have been issued since early July, totaling $2.26 billion...

How much money California hopes to raise in total has not yet been determined. Controller John Chiang earlier said the state needs $10.5 billion more to get through the year.

Now, why would JPM loan the money to Cali -- a horrible credit risk -- at such favorable terms?

You guessed it: all of us taxpayers -- around the country -- appear to be backstopping this Democrat-instigated catastrophe. Talk about taxation without representation:

A plausible case can be made that this is an indirect bailout by the US government of California. JP Morgan is deemed to big to fail, and can borrow from both the Fed and at reduced costs in the market because of its status. This makes it far easier for the bank to lend confidently to California. What's more, JP Morgan can assume that if California were to come close to defaulting on the loan, the US government would bail out California.

Welcome to the era of hope, change and crony capitalism. Oh, and my beloved liberal readers: perhaps you can find a way to blame Bush for the current condition of the Democrat Utopia of California.

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