California asks feds to back its IOUs
Posted by ecoshift on April 15, 2009
California asks feds to back its IOUs – Sacramento Bee
By Steve Wiegand
Published: Wednesday, Apr. 15, 2009 – 12:00 am | Page 1A
Facing what could be the largest cash flow problem in state history, California officials are asking the federal government to back billions of dollars in short-term loans the state must seek in July.
“We’re going to need cash-flow borrowing the likes of which California has never seen, at a time when market and economic forces are stacked against us,” said Tom Dresslar, spokesman for state Treasurer Bill Lockyer. “That’s a recipe for calamity.”
While the state routinely borrows money at the start of fiscal years on July 1 by issuing interest-bearing Revenue Anticipation Notes, or RANs, a combination of factors have conspired to form a mountainous hurdle this time around.
Those factors include the sheer size of the amount needed – at least $13 billion – the state’s woeful credit rating and the generally sorry state of the nation’s financial markets.
Lockyer and other state and local officials have been quietly exploring the idea of doing what hordes of private financial and insurance enterprises have done in the past year: Ask Uncle Sam for help.