The Waiting Room

This was originally a reply to a post by nbowa , but I was so happy with it, I put it here, too.

I know a guy that engineers for caltrans (he's building the new bay bridge). They had to work for minimum wage a few years ago, with IOU's for the missed pay...

I'm betting if California went bankrupt, all the bonds would default, therefore all discretionary funding would stop, meaning that all civil engineering projects would stop, all school programs outside the core school day would stop (including the anti-gang programs), most state employees would be at least furloughed if not laid off. All remaining funds would be used to pay police/fire/other emergency types.

Since Ah-nahld raised the possibility, they would be forced to sell assets, in this case meaning the state monuments, parks, zoos, tollways, bridges(!) etc.

In effect, California would become a much more commercial, much more dangerous, much poorer, but much more expensive place. For a very long time, as they would be unable to borrow at sub-astronomical interest rates for years, possibly more than a decade.

Oh, and kiss green power in California goodbye.

Now you answer your questions ^_^ the Fed may step in, if the needed amount is less than a couple hundred billion dollars. To say nothing of the fact that the Speaker of the House is from SF, so that will help the "Save California First" effort. But it would be in the position of buying California bonds, not just giving them money. But I would expect a lot of carnage in the pensions/retirement/benefit realms.

Pretty much, take your run of the mill giant airline bankruptcy and cross it with Chrysler, and add a hedge fund collapse, and you've got a California bankruptcy.

OH! I FORGOT! I'm willing to bet that there are hundreds of billions of dollars worth of credit default swaps on these shaky-for-years bonds California has been selling...everything since Enron, really. And who'll be on the hook for those? AIG.......