Corvette Forum : DigitalCorvettes.com Corvette Forums banner

1 - 8 of 8 Posts

·
Registered
Joined
·
19,914 Posts
Discussion Starter #1
* Republican declares bailout era over; float bankruptcy

* Lawmakers worry about pension funds' investments

* Bankruptcy talk among factors driving munis exodus

* Firefighters say politicians threaten their life savings (Adds pension legislation, hearing, New Jersey, governors)

By Lisa Lambert

WASHINGTON, Feb 9 (Reuters) - Republican lawmakers swore off any bailout of U.S. state and city governments on Wednesday, turning the screws on states and floating bankruptcy as a radical fix for underfunded pensions and budget problems.

"Reckless spending fueled by bottomless borrowing and guaranteed by endless bailouts is an unsustainable course," said Representative Patrick McHenry, chairman of a House of Representatives subcommittee on bailout oversight.

"The era of the bailout is over," he said at a hearing about states' fiscal distress.

Despite a modest recovery in the national economy since the recession officially ended in 2009, states continue to struggle with low revenues, which are creating multibillion-dollar budget gaps. Altogether, they project budget deficits of at least $100 billion for the next fiscal year, which for most begins this summer.

Those budget woes have prompted investors in the $2.8 trillion municipal bond market to dump their bonds, economists to warn of a drag on the national recovery, and U.S. lawmakers to consider allowing states to declare bankruptcy.

Just the possibility that Congress would allow states to declare bankruptcy has spooked investors, helping fuel the exodus from the municipal bond market and making it even harder for strapped states to raise money to cover revenue gaps.

Members of Congress -- both Democrats and Republicans -- worry states will turn to the U.S. government for assistance.

In fact, President Barack Obama in his budget blueprint on Monday will propose giving some relief to states on unemployment insurance debt, the White House said on Tuesday, hoping to avoid a bailout. [ID:nN08295549]

Republicans, however, say there is no political appetite to repeat the kind of extraordinary aid to states that was in the $814 billion economic stimulus plan approved by a Democratic-run Congress in 2009. The plan included the largest transfer of federal funds to states in U.S. history.

"No way is the federal government going to bail out our state," said Representative Joe Walsh, an Illinois Republican associated with the anti-spending Tea Party movement, which helped Republicans win control of the House in November elections.

The Tea Party is pitted against government worker unions in a battle over public pensions. Underfunded pensions threaten to throttle budgets across the United States, particularly in Illinois and California where union votes can swing an election.

On Wednesday, some of the most conservative lawmakers, such as Republican Representative Paul Ryan, threatened states with a steep penalty for under-reporting pension liabilities: eliminating federal tax exemptions for municipal bonds.

BANKRUPTCY AND BAILOUTS: WHO WANTS THEM?

Legislation that would allow U.S. states to file for bankruptcy could be introduced within the next month. [ID:nN21157276] The House Judiciary Committee has scheduled a hearing for Monday on public pensions, state insolvency and "the possibility" of allowing states to file for bankruptcy.

States currently cannot declare bankruptcy because the U.S. Constitution recognizes them as sovereign entities.

It's uncertain how much support a bankruptcy bill would get in the Senate, which is still controlled by Democrats.

Public pension funds' investments were hit hard by the financial crisis and employers lowered contributions to the funds as revenue collapsed and they grasped for spending cuts.

On Wednesday, New Jersey was downgraded by Standard & Poor's on concerns over its pension funding, news that could increase borrowing costs. [ID:nN09222050]

Unfunded pension obligations are estimated at as much as $3 trillion and government officials blame those obligations for at least part of their budget woes.

Still, no state has asked for a bailout and the bipartisan National Governors Association sent congressional leaders a letter last month saying states would not seek federal aid.

Public employees on Wednesday hit back at suggestions they were to blame for states' fiscal woes, with a firefighters group taking out a full-page advertisement in the USA Today newspaper saying, "After a career saving lives, politicians want to take our life savings."

http://www.reuters.com/article/2011/02/09/usa-states-bailout-idUSN0919345920110209
 

·
Registered
Joined
·
6,220 Posts
Of course the bailouts have to stop. The banks, investment firms, insurance giants all got their billions.

Gee, I wonder where the money will come from? Hmmm. :rolleyes:
 

·
Banned
Joined
·
7,823 Posts
the union and thier members will ultimately be done in by their greed.
 

·
Registered
Joined
·
12,410 Posts
the union and thier members will ultimately be done in by their greed.
Either that, or the USofA will be done in by their greed. Cronyism is a very powerful lobbying tool, and the power it creates can be very corrupting. Unionization of government employees has been shown to be a very onerous precedent.
 

·
Banned
Joined
·
31,366 Posts
The bailout is ongoing, but the states will not see a penny of it. Bernanke is pouring money into the banks under a bailout called QE2, and QE3 will start in the next few weeks.. because the bailouts, QE1,QE2 have all failed to do what they were supposed to.

The stock market bubble is stretched to the limit and it will be uglier than anything so far when it pops.
 

·
Registered
Joined
·
12,410 Posts
The bailout is ongoing, but the states will not see a penny of it. Bernanke is pouring money into the banks under a bailout called QE2, and QE3 will start in the next few weeks.. because the bailouts, QE1,QE2 have all failed to do what they were supposed to.

The stock market bubble is stretched to the limit and it will be uglier than anything so far when it pops.
I just heard that Germany is about to buy the NYSE...
 
1 - 8 of 8 Posts
Top