Cities & states burn while ideologues fiddle & oppose the rescue bill

[chicagoexpat]

Not that anyone can possibly expect facts to affect anyone's ideas cause "Ekonomiks iz so harrd to unnerstand!! I don't wanna!"

First Massachusetts announces the effects of the credit crunch (which many DU'ers simply want to deny happens)...

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=132&topic_id=7256498&mesg_id=7256498

http://www.boston.com/business/articles/2008/09/30/unknown_terrain_for_economy

Then reports of other states & cities already feeling the crunch, and causing loss of jobs & projects:

http://www.nytimes.com/2008/10/01/business/01muni.html

Under Strain, Cities Are Cutting Back Projects

Cities, states and other local governments have been effectively shut out of the bond markets for the last two weeks, raising the cost of day-to-day operations, threatening longer-term projects and dampening a broad source of jobs and stability at a time when other parts of the economy are weakening.

The sudden loss of credit, one of the ripple effects of the current financial turmoil, is affecting local governments in all parts of the country, rich and poor alike. In New York, a real estate boom has suddenly gone bust. Washington has shelved a planned bond offering to pay for terminal expansion and parking garages already under construction at Dulles and Reagan National Airports.

Billings, Mont., is struggling to come up with $70 million more for a new emergency room. And Maine has been unable to raise $50 million for highway repairs.

“We really are in terra incognita here,” said Robert O. Lenna, executive director of the Maine Municipal Bond Bank, which helps that state’s towns and school districts raise money. He said he had worked in public finance for 34 years and had never seen credit evaporate so completely.

Maine had already begun some of its road work when the bond markets stopped functioning, so now it is scrambling for bank loans to keep the dump trucks rolling. If money does not start flowing soon, Mr. Lenna said, Maine will have to cancel some of its road and bridge projects.

The only alternative would be what New York City did on Monday: Go into the locked-up markets and whip up demand by offering to pay investors a very high return.

And higher rates suggest some degree of belt-tightening, especially difficult in places where tax revenues are being squeezed because of falling real estate values and the slowing economy.

Some governments, already straining to balance their budgets, will have to cut payrolls, he said, and others may decide to raise taxes.

Last year, governments across the country issued about $23 billion of fixed-rate municipal bonds in September. This September they issued $15 billion — all but about $2.2 billion of it in the first two weeks of the month, according to Municipal Market Advisors, a research and strategy firm.

Tight money is already becoming apparent in some states. In Montana, officials had planned to sell $130 million of bonds to the public last December to pay for a new emergency room, cancer center and improvements at the Billings Clinic, a 272-bed hospital in the state’s largest city. But they were dissuaded by higher interest rates even then.

“I’ve been second-guessing it since then,” said Michelle Barstad, executive director of the Montana Facility Finance Authority. “Things just keep getting worse and worse.”

The authority borrowed $60 million of the total cost from private lenders in May, but is now unsure where to get the remaining $70 million. Ms. Barstad said one option under consideration was to borrow about $20 million from local banks and scale back the project, at least for now.

“We’re just sitting on our hands like everybody else, trying to figure out what to do and how we do it,” said Ms. Barstad, adding that she would welcome a return of the days of simple, fixed-rate bonds.

The credit crisis caused Athens-Clarke County, Ga., to delay a $221 million bond issue planned for the day Lehman Brothers declared bankruptcy. The county has been planning for 10 years to upgrade three sewage treatment plants built more than 40 years ago when the population was much smaller.

[Hassin Bin Sober]

1. Chicago just announced 1000 job cuts along with the intention to NOT fill 3000 upcoming vacancies...

That's 4000 total.

I deal with the city writing bond backed housing grants. Those funds dried up several months ago even though the city has authorization to raise the funds. The bond agent tells me buyers are on strike even for these good investments.

[mhatrw]

7. So this has been going on for months, you say? n/t

[anigbrowl]

9. Don't worry about it. Apparently we're going to have a glorious revolution and it will all fix itsel

According to some of the tinfoil hat brigade around here. I wish I didn't have to be so sarcastic but it's apparent that the more excitable and least informed are out in full force.

[wtmusic]

2. "Cities & states burn" - how dramatic.

Whaaa. We can't take out more loans. Whaaa...we might actually have to raise taxes. Cash on the barrelhead.

:cry:

I can't wait. Bring it on.

[Honeycombe8]

3. Ain't that the truth. The situation's so bad that even Repubs who consider it socialism....

think it's a far sight better than what's gonna happen if something isn't done.

[entanglement]

4. How much are you getting paid to spread this crap?

[chicagoexpat]

5. yeah, the cities & states cutting back on programs are just lying about what they have to do

It's all a conspiracy.. them black helicopters are circling... they want ur 401K...

[magellan]

6. Programs being cut back and job cuts have been going on some time where I live

n/t

[chicagoexpat]

10. Exactly. It's coming to a head now, while some stick their head in the sand

[Jim Sagle]

8. Don't reward the blackmail artists! Smash the capital strike!

[That Guy 888]

11. How Many Economists Support bush's Bailout Bill?

A bad plan is a bad plan. Congress proposes legislation, not bush, and they should work on their own solution rather than basing it on another preplanned "Patriot Act". Can you find some economists without connection to Goldman-Sacks who support bush's bailout?

PDF link http://solari.com/blog/docs/Final-Bailout-White-Paper.pdf

Proposed $700 Billion Bailout Is
Too Little, Too Late to End the Debt Crisis;
Too Much, Too Soon for the U.S. Bond Market
Submitted by
Martin D. Weiss, Ph.D. and Michael D. Larson
Weiss Research, Inc.
to
United States Congress
Senate Banking Committee
and House Financial Services Committee


Executive Summary
New data and analysis demonstrate that the proposal before Congress for a $700
billion financial industry bailout is too little, too late to end the massive U.S. debt
crisis; and, at the same time, too much, too soon for the U.S. Government bond
market where most of the funds would have to be raised.

I. Too Little, Too Late to End the Debt Crisis. Congress should

1. Disregard data based on the list of troubled banks maintained by the Federal
Deposit Insurance Corporation (FDIC). The FDIC’s list currently has 117
institutions with $78 billion in assets. However, based on a broader analysis of
recent FDIC call report data, we find that institutions at risk of failure include
1,479 FDIC member banks and 158 thrifts with total assets of $3.6 trillion, or
36 times the assets of banks on the FDIC’s list.
2. Think twice before providing a broad bailout for U.S. debts given the wide
diversity of mortgage holders and the great magnitude of the total debts
outstanding in the United States. Just-released Federal Reserve Flow of Funds
data show that, beyond mortgages, there are another $20.4 trillion in privatesector
consumer and corporate debts, plus $2.7 trillion in municipal securities
outstanding.
3. Recognize that, among banks and thrifts with $5 billion or more in assets, there
are 61 banks and 25 thrifts that are heavily exposed to nonperforming
mortgages.
4. Get a better handle on the enormous build-up of derivatives held by U.S.
commercial banks.
5. Base any legislation on (a) realistic estimates of the loan amounts already
delinquent or in default, and (b) reasonable forecasts of how many more are
likely to go bad in a continuing recession.
6. Recognize the inadequacies in already-established safety nets, such as the
FDIC for bank depositors, Securities Investor Protection Corporation (SIPC)
for brokerage customers, and state guarantee associations for insurance
policyholders.
There should be no illusion that the $700 billion estimate proposed by the
Administration will be enough to end the debt crisis. It could very well be just a
drop in the bucket.
Weiss Research, Inc. 4
II. Too Much, Too Soon for the U.S. Bond Market. There should also be no
illusion that the market for U.S. government securities can absorb the additional
burden of a $700 billion bailout without putting dramatic upward pressure on U.S.
interest rates.
The Office of Management and Budget (OMB) projects the 2009 federal deficit
will rise to $482 billion. But adding the cost of announced and proposed bailouts,
now approximately $1 trillion, it is undeniable that the federal deficit could double
or triple in a short period of time, driving interest rates sharply higher and
aggravating the very debt crisis that the bailout plan seeks to alleviate.
III. Policy Recommendations to Congress
1. Congress should limit and reduce the funds allocated to any bailout as much as
possible, focusing primarily on our recommendation #4 below.
2. If Congress is determined to provide substantial sums to a new government
agency to buy up bad private-sector debts, we recommend that the new agency pay
strictly fair market value for those debts, including a substantial discount that
reflects their poor liquidity.
3. Congress should clearly disclose to the public that there are significant risks in
the financial system that the government is not able to address.
4. Rather than protecting imprudent institutions and speculators, Congress should
protect prudent individuals and savers by strengthening existing safety nets,
including the FDIC for bank deposits, SIPC for brokerage accounts and state
guarantee associations that cover insurance policies.

[chicagoexpat]

13. I couldn't care less... I support Obama & teh Dem leaders, not some RW maggots or uninformed opinion

[2speak]

12. Just stepped outside

and I can see for 50 miles in every direction and I am close to a metropolitan city with many suburbs around it. I don't see any smoke.

[eowyn_of_rohan]

14. they're burning us to *force* Congress to pass this insane bill

DON'T GIVE IN

[girl gone mad]

15. This has been happening for some time now,

Passing the bailout bill will not stop it because it does not require banks to give out loans.

If you are concerned about this, ask your congressperson to vote on a program of direct loans.