earendil31: (Default)
This was originally a reply to a post by [livejournal.com profile] 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.......
earendil31: (Default)
This week, I got a good offer with no tricks (I'm good at finding things in small print) for that bane of the last three years, the pre-qualified credit card.  Me, with my somewhat wonky credit.

This means the 'crisis' part of the credit crisis is, effectively, over.

Which means my fear of a GM chapter 7 liquidation quickly following any chapter 11 declaration is also over.  As the way of things returns to normal, so too should the way of business.  When viability day hits mid-week, if GM doesn't have a plan for normal return to profitability, they should be forced into bankruptcy protection, just as they would have been in any year but last year.

Giving them more time/money would be a mistake on two fronts.  It would ruin whatever credibility President Obama got out of his 'round the nation stimulus tour.  And it would be a genuine waste of money.  I'm all for the continuation of the American automobile manufacturing industry, but this is a chance for that to happen with attendant increase in competitiveness that a regular chap 11 brings. 

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earendil31

December 2010

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