Bailin' It Out In The Hotel California

Yeah, so Ahnold is basically throwing around the idea to the Feds that $15 billion in loans to the Golden State is really a much better deal than throwing another $15 billion at a bank or Chrysler or GMAC or whatever, right?

The state needs to borrow every summer because most of its income-tax receipts flow in during the winter and spring. But this year, the need is bigger than ever: Even if lawmakers balance the budget, California will need $15 billion to $20 billion in short-term loans to make it through the year. It is unclear whether Wall Street will put up that much cash. California's credit rating is in the cellar and the state has never secured a short-term loan that large.

That is where the federal government comes in -- or so state officials hope.

Lockyer and Schwarzenegger say last fall's federal bailout legislation gave the Obama administration legal authority to back the state's loans. Now is the time to exercise that power, they say. Under their plan, the federal government would guarantee private lenders that they would be paid -- with taxpayer money from across the country -- if California defaults on its loans. The idea is to take the risk out of lending to California so the banks will put up the funds.

"The state's view is, if they can bail out the auto industry, they can do this for us," said attorney Robert Feyer of Orrick, Herrington & Sutcliffe, which is advising the state on the matter.

As I said yesterday, if Obama does this, it becomes implied that every state, county, city, town and village is eligible for a bailout. Only one problem:

If basically every taxpaying citizen in America needs a bailout, then who's paying for it?