Comments on: When states don’t pay their debts http://blogs.reuters.com/felix-salmon/2010/06/17/when-states-dont-pay-their-debts/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: LanceWinslow http://blogs.reuters.com/felix-salmon/2010/06/17/when-states-dont-pay-their-debts/comment-page-1/#comment-16043 Sun, 20 Jun 2010 08:37:59 +0000 http://blogs.reuters.com/felix-salmon/?p=4328#comment-16043 This is a real problem, before retirement our company cleaned fleets of vehicles, and about 30% of our business was fleets owned by government agencies (all levels of government) and in the 80s, I cannot tell you how bad the receivables had gotten, 120-180 days out was common, it was a nightmare. Many small businesses think they are set to have government contracts, not so, you become their bank, and when they cut budgets or run out of money, you don’t get paid, it’s crazy. Most people don’t realize how they use the business community, state governments are the worst, your money comes out of another area or region usually, and they don’t care, and when they cut staff, they don’t return calls either.

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By: gramps http://blogs.reuters.com/felix-salmon/2010/06/17/when-states-dont-pay-their-debts/comment-page-1/#comment-16026 Sat, 19 Jun 2010 03:33:37 +0000 http://blogs.reuters.com/felix-salmon/?p=4328#comment-16026 ..actually, I told my California elected reps to go ahead and let default on G.O. bonds happen..first people, next bondholders, PIMCO, GoldmanSachs and stuff..if the PIMCO’s and bondholders try and take the furniture, bad things could happen..they took a chance on the State, they lose..so it goes..

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By: HBC http://blogs.reuters.com/felix-salmon/2010/06/17/when-states-dont-pay-their-debts/comment-page-1/#comment-16020 Fri, 18 Jun 2010 20:27:10 +0000 http://blogs.reuters.com/felix-salmon/?p=4328#comment-16020 It’s easy but almost too late to start worrying about debt on the balance sheets run up by former State employees to satisfy external corporate financing for (often fictional) things that never did the State residents any good. That legacy of bean-shuffling is what’s brought State after State to its knees: viz. Enron et seq in the case of California – from which there’s no synthetic way forward, only down.

While it would have been much better not to have indulged in such practice in the first place, it’s still not too late for States to draw sovereign lines in the sand, to go tabula rasa on the privateers leeching off State budgets.

Then we can talk about the merits of thrift, how to live accordingly, etc.

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By: Strych09 http://blogs.reuters.com/felix-salmon/2010/06/17/when-states-dont-pay-their-debts/comment-page-1/#comment-16018 Fri, 18 Jun 2010 19:24:58 +0000 http://blogs.reuters.com/felix-salmon/?p=4328#comment-16018 Just a minor quibble. In the case of California, the state-issued scrip was issued partially because state law mandates that bond holders be paid on time.

So when cash was running low, the people who had money due them who were not bond holders, such as contractors who did work for state agencies, etc., got paid in scrip so that there was actually money left over to pay bond holders on time. Because of the way that the state constitution is written, if it really comes down to it, bond holders will in almost every case be paid on time and before anyone else owed money, including employees. Unless armageddon actually arrives, California simply can’t default on general obligation bonds.

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By: MattJ http://blogs.reuters.com/felix-salmon/2010/06/17/when-states-dont-pay-their-debts/comment-page-1/#comment-16011 Fri, 18 Jun 2010 17:19:11 +0000 http://blogs.reuters.com/felix-salmon/?p=4328#comment-16011 We have GOT to stop letting investors off the hook when they assume the feds will prevent them from taking losses. If the debt they are buying has a higher yield than Treasuries, then they should know it is riskier than Treasuries.

If the feds feel they have to cover such losses, at the very least they should not give an investors a higher return than equivalently-termed Treasuries. What I would like to see is a penalty based on the the excess yield; if an investors buys debt at 5%, and the Treasury debt for the same term is 3%, then the federal government limits any cover to 3 – (5-3) = 1% yield. It is insane that we are allowing investors to reach for yield because the ‘safe’ Treasury yield is too low, and then grant them the same safety that they spurned.

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By: rjs0 http://blogs.reuters.com/felix-salmon/2010/06/17/when-states-dont-pay-their-debts/comment-page-1/#comment-16000 Fri, 18 Jun 2010 10:49:37 +0000 http://blogs.reuters.com/felix-salmon/?p=4328#comment-16000 here’s gillian tett of the FT on the same: http://www.ft.com/cms/s/0/eb39cc88-7a1b- 11df-9871-00144feabdc0.html

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By: rjs0 http://blogs.reuters.com/felix-salmon/2010/06/17/when-states-dont-pay-their-debts/comment-page-1/#comment-15999 Fri, 18 Jun 2010 10:44:41 +0000 http://blogs.reuters.com/felix-salmon/?p=4328#comment-15999 you’re new to the state budget situation:

http://marketwatch666.blogspot.com/2010/ 06/time-for-it-to-hit-fan.html

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By: johnhhaskell http://blogs.reuters.com/felix-salmon/2010/06/17/when-states-dont-pay-their-debts/comment-page-1/#comment-15998 Fri, 18 Jun 2010 10:39:02 +0000 http://blogs.reuters.com/felix-salmon/?p=4328#comment-15998 Felix, if you are correct, then you may as well head to Albany/Springfield/Sacramento and look for a job as a consultant with the following plan:
1. Issue as much debt as needed to clean up outstanding payables.
2. Issue an additional amount, as much as appears necessary to guarantee re-election of state Legislature and Governor.
3. Threaten default, get bailout.

Oh, and then swing by lower Manhattan and put the word out to the rating agencies that all states share the sovereign rating.

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By: gringcorp http://blogs.reuters.com/felix-salmon/2010/06/17/when-states-dont-pay-their-debts/comment-page-1/#comment-15997 Fri, 18 Jun 2010 10:20:58 +0000 http://blogs.reuters.com/felix-salmon/?p=4328#comment-15997 And of course, where there are receivables, there’s a securitization opportunity. Just sayin…

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