Another Day, Another State Asking For a Loan

And this time it's Massachusetts.

Massachusetts plans to sell $750 million in short-term notes this week, leading U.S. states and local governments seeking to revive debt sales after financial turmoil inhibited their ability to borrow since mid-September.

Massachusetts approached the U.S. Treasury about possible financing if it can't raise the money from private investors. California, which seeks to borrow $7 billion next week, has also communicated with federal authorities.

Sales of fixed-rate bonds fell to about $800 million each of the past two weeks, after averaging more than $6 billion weekly this year, based on data compiled by Bloomberg. The lack of new issuance contributed to three weeks of rising borrowing costs by making it harder to gauge market values, according to George Friedlander, municipal strategist at Citigroup Inc.

``With so few issues being placed successfully, traders and institutional buyers are backing off their bids to incorporate an extra premium, because they cannot pinpoint the worth of a given bond,'' Friedlander said in a weekly report from New York. ``The muni market tends to struggle when very limited successful new issue supply leads to weak `price discovery.'''

Massachusetts will take bids from investment banks seeking to underwrite a deal that would boost the state's cash flow until more tax revenue arrives this fiscal year. The offering, previously set for Oct. 2, will proceed tomorrow, said Francy Ronayne, spokeswoman for State Treasurer Timothy Cahill.

I was just listening to Tim Cahill on CNBC this afternoon. He says he wants Massachusetts to have the same access banks currently do to the Fed Discount Window "if necessary".

I expect that to happen. We're going to be bailing out states here within days.

[UPDATE] Dow now off well over 700 points.