The State Of Our Bailouts

Forgot bailing out AIG or Lehman Brothers or Wall Street. Apparently we have to bail out the entire State of California government while we're at it.

California may need an emergency loan of up to $7 billion from the federal government within weeks, the Los Angeles Times on Friday quoted Gov. Arnold Schwarzenegger as saying in a letter to U.S. Treasury Secretary Henry Paulson.

In the letter dated October 2, Schwarzenegger called for the passage of the $700 billion financial industry bailout plan which the U.S. House of Representatives is expected to vote on Friday, the Times said.

"Absent a clear resolution to this financial crisis, California and other states may be unable to obtain the necessary level of financing to maintain government operations and may be forced to turn to the federal treasury for short-term financing," Schwarzenegger wrote in the letter, according to the paper.

The credit crisis has pretty much hit at the worst possible time for California. Missouri too is having problems issuing state bonds.

Credit market troubles have forced officials to scrap an innovative plan to fix hundreds of Missouri's worst bridges, thwarting what was to serve as a national roadmap for quickly renovating aging infrastructure.

The plan would have awarded a single contract to finance, design and build 802 bridges within five years and then maintain them for the next 25 years. The state would have made annual payments to the contractor.

The plan was hailed as a potential model for other states and a better alternative for getting repairs done that otherwise would take two decades at Missouri's current pace.

But that was before the credit market crisis caused the cost of the bridge project to spike.

Florida's problem? It can't get money for schools and roads.

A top Florida money manager says the state can't borrow the money it needs for roads and schools due to the national credit crisis.

Colorado is having problems issuing bonds as well.

The credit crunch gripping the nation is hitting municipalities across Colorado.

Bond issues have been delayed in Colorado Springs and Steamboat Springs.

A $2 billion "checking account" for 360 government agencies across the state has limited its daily withdrawal rate because of liquidity fears.

Concerns are being raised that voters next month may be wary of passing a record $2.5 billion in construction bonds for 25 school districts, as well as the ability of credit markets to sell the bonds if they pass.

As I was talking about Wednesday, the credit crunch is going to be smashing into local governments, counties, and at this point entire states are in deep trouble.

The bailout's not going to change that. Not in the least. It's a basic confidence issue and the bailout simply doesn't address the basic reasons behind the crunch. So yes, you're going to most likely see governments go under in the next few months and take thousands and thousands of jobs with them.