Looks like the states will be the next ones stepping up to the trough for a bailout. California and Massachusetts have both asked the Fed if they can borrow money under the same terms as the bank bailout. Maryland is sure to follow as the dam breaks and states rush to take advantage of a new source of funds.
There's a reason folks won't buy your bonds, Sacramento and Boston: you're a bad risk! Like all those sub-prime borrowers and "greedy" fat cats at Countrywide and Lehman Brothers, you assumed real estate prices would continue to rise and made decisions based on that assumption. You made health care promises and created generous pensions for teachers, firefighters, and other public employees. You borrowed money for road projects, pork projects, and prisons.
Now real estate prices have headed south meaning lower assessments and lower property tax receipts. The economy is in the crapper meaning lower tax receipts. It's the proverbial Rainy Day. But there's no rainy day fund.
Ironic (or hypocritical) that you won't hear Congress complain about the statehouse politicians they way they complain about the Wall Street boys even tho both of them made the same bad bets. Wall Street did it for profit, Boston and Sacramento politicians did it for votes. In fact, not only will the libs in Congress not attack their statehouse cronies, it will be the libs in Congress who will push to bail the states out.
Barney Frank, the man who had as much to do as anybody with killing Fannie and Freddie reform legislation over the years, is already talking it up. "I hope that the money won't be needed . . . but if it is, there is no better borrower than the state." Yeah, right. If that's the case, why does the Governator have to come begging to the Fed for a handout?
What Congress should do is tell fiscally irresponsible states to take a hike.