GS reccomends credit default swaps against state of WI

[Adam Brooks]

Update at bottom of thread


http://globaleconomicanalysis.blogspot.com/2008/12/goldman-recommends-credit-default-swaps.html

Basically this is a bet against the States ability to repay their debt. Needless to say, the state of WI's finance director is calling this idea un-american, distasteful etc to bet against the state.

At least MN is honest about the financial reality that numerous states are in. Meanwhile WI continues to live in the past and would rather say how dare we hurt their feelings vs do something to fix the problem. We are in for a wild ride.

Also my friend from GS on the NYSE floor is indicating that New York especially NewYork City will be facing extreem financial hardship in the near future for the same reasons. Something to watch for.

[subliminal1284]

I guess if youre like me and have nothing to lose you dont have anything to worry about. haha

[Adam Brooks]

We are all affected by this. The state will need to further increase taxes and cut spending on multiple levels in order to generate more revenue. Children in schools suffer, we suffer w/ crappy roads, less police and fire protection plus higher taxes.

[Windsors 03 Cobra]

Thats ok Bama is going to start a new WPA and put millions of folks to work and give billions to each state.

[Al]

We are all affected by this. The state will need to further increase taxes and cut spending on multiple levels in order to generate more revenue. Children in schools suffer, we suffer w/ crappy roads, less police and fire protection plus higher taxes.

But more teachers will work for MPS central services (milwaukee version of a rubber room) and the union members will outnumber the teachers in the classrooms.

[Adam Brooks]

Funny how things come full circle:
From http://www.todaystmj4.com/news/local/36999584.html


Doyle Asks for Trillion Dollar Bailout



MADISON, Wis. (AP) -- Five Democratic governors are asking the federal government for a $1 trillion bailout package, including $250 billion for education and $150 billion in middle class tax cuts.
The governors from Wisconsin, Massachusetts, New Jersey, New York and Ohio on Friday said they have presented their plan to President-elect Barack Obama's transition team as well as congressional leaders.
They said that level of federal aid is needed to deal with unprecedented state budget shortfalls in 41 states and Washington, D.C., that the Center on Budget and Policy Priorities pegged at $42 billion for the current fiscal year alone.
Wisconsin Gov. Jim Doyle said congressional leaders and the Obama team have been receptive to the governors' ideas.
"That's not to say they've told us this is what they'll do or they're with us all the way," Doyle said. He also said other governors were involved in creating the plan, which grew out of an early December meeting that Obama had with the nation's governors.
Obama's aides and congressional leaders have been talking about a package roughly half the size of the two-year plan the five governors proposed Friday.
Over two years, $1 trillion is equal to more than 3 percent of the gross domestic product, the U.S. economy's total output. A package of that size is likely to draw significant opposition from congressional Republicans and concern from moderate and conservative Democratic lawmakers who oppose large budget deficits.
In addition to the money for education and tax cuts, the governors said their plan includes $350 billion for road construction and other infrastructure projects and $250 billion for social service programs such as Medicaid.
The governors all said their states are facing unprecedented budget shortfalls that will require deep cuts to services and possibly irreparably harm their education systems.
"We aren't crying wolf," Ohio Gov. Ted Strickland said. "These are real circumstances, unprecedented situations we are facing."
Ohio's budget deficit could grow to $7.3 billion even after $1.9 billion was cut from its current budget, Strickland said.
New York Gov. David Paterson said his state faces a $15.4 billion deficit. Wisconsin's budget is expected to be $5.4 billion short by mid-2011.
New Jersey Gov. Jon Corzine said he had just left a meeting with state legislative leaders where he proposed $2.1 billion in cuts on top of $600 million that's already been cut from the budget.
Strickland said the federal stimulus is needed to help bridge the gap from the current recession to when there's a rebound. Even with the money, states will have to make deep cuts, he said.
"We are not, any of us, talking about federal money to expand spending, expand programs, to do new things," Massachusetts Gov. Deval Patrick said.
A forecast from Global Insight shows that the economy hasn't hit bottom yet.
National economic growth is now expected to drop 1.8 percent this year, rather than increase 1 percent. The U.S. labor market is expected to lose 3.7 million jobs during the downturn, with unemployment reaching 8.7 percent in the first half of 2010, it said.
That forecast assumes there will be a $550 billion federal stimulus package, roughly half of what the governors requested.
(Copyright 2009 by The Associated Press. All Rights Reserved.)

[Voodoo Chick]

Everyday, the news gets just a little worse, doesn't it?

[SSDude]

We are all affected by this. The state will need to further increase taxes and cut spending on multiple levels in order to generate more revenue. Children in schools suffer, we suffer w/ crappy roads, less police and fire protection plus higher taxes.

They will certainly increase taxes but the state will never seriously cut spending like they should. they will continue to rationalize that all programs are important and can't be given up. Take for example the Knowles Nelson stewardship program at an annual cost of $86 million per year until 2020. It allows the state to purchase land every year. A totally unnecessary that should be cut out but it won't be.
The statement
Children in schools suffer, we suffer w/ crappy roads, less police and fire protection is the typical scare tactic statement thrown around by the dems to get people to buy their bullcrap and go along with tax increases when these cuts would be the very last in a long like of cuts that should come first.
There's many more programs like Knowles Nelson who's funding can be redirected to essential government functions while eliminating unnecessary ones.

[Feature Pony]

Gives me another reason to move to AZ

[Prince Valiant]

meh. I want to move to either TX or Australia...

[GTSLOW]

Gives me another reason to move to AZ

Why did I leave :goof

[Rocket Power]

Why did I leave :goof

Dumbass:rolf

[Chalky]

My guess is Doyle was hoping to have received his appointment from BO before the state's financial crisis made national news. It's my understanding that the states bond rating went into the toilet some time ago from excessive borrowing.

[SSDude]

Doyle Asks for Trillion Dollar Bailout



MADISON, Wis. (AP) -- Five Democratic governors are asking the federal government for a $1 trillion bailout package, including $250 billion for education and $150 billion in middle class tax cuts.
The governors from Wisconsin, Massachusetts, New Jersey, New York and Ohio on Friday said they have presented their plan to President-elect Barack Obama's transition team as well as congressional leaders.
They said that level of federal aid is needed to deal with unprecedented state budget shortfalls in 41 states and Washington, D.C., that the Center on Budget and Policy Priorities pegged at $42 billion for the current fiscal year alone.
Wisconsin Gov. Jim Doyle said congressional leaders and the Obama team have been receptive to the governors' ideas.

These five clowns should be impeached from office for gross incompetence!
They took the job as governors to run the states they live in. The job requires that you deal with the budget and make the tough decisions, guide the legislature to the best solutions.
You were Not elected to beg for handouts!

[Chalky]

I believe I read that BO's minions told Doyle and the other govs that they were thinking 1/2 of what the govs were asking for. Seems like we have a few elected officials that are concerned about national debt. (That's funny)

So the dance begins. :durr:shades

[Adam Brooks]

Interestingly, we had some warning signs made public in October when WHEDA shut down (and is still down):
from http://www.jsonline.com/news/wisconsin/32471039.html


WHEDA suspends lending

Halt in new mortgages is temporary, agency says

By Paul Gores (pgores@journalsentinel.com) of the Journal Sentinel
Posted: Oct. 3, 2008
Wisconsin’s affordable-housing agency has temporarily stopped issuing mortgages for single-family homes because it’s having trouble raising the money needed to make the loans — a situation it said is a direct result of the national financial system crisis.
It’s the clearest evidence yet that the crisis on Wall Street is hitting Wisconsin’s Main Street.
“We primarily operate with tax-exempt mortgage revenue bonds. That’s what funds our mortgages. And right now, we can’t raise capital. There’s nobody investing in those bonds,” said Kate Venne, spokeswoman for the Wisconsin Housing and Economic Development Authority.
It is the first time in the 30-year history of WHEDA, which works through local lenders to offer below-market interest rates to first-time homebuyers who have low and moderate incomes, that it has suspended its mortgage lending program because of liquidity problems. And it comes at a time when more first-time home buyers are what the housing market needs to become vibrant again.
“What it is is a symptom,” said longtime area mortgage lender Steve LaDue, vice president of business development for Waterstone Mortgage Corp. in Pewaukee. “That’s never happened before. That’s the first piece of the tsunami coming at us.”
Venne said the agency was forced to raise its interest rates for loans, which had been around 6%, to as high as 7.5% this week. That’s when WHEDA decided to stop making new loans until the availability of capital improves.
Federal law limits the amounts housing finance authorities such as WHEDA can lend. A formula based on population stipulates a certain amount of capital they can raise, and in turn, lend out as mortgages.
“WHEDA and our counterparts in other states are continuing to look into other options to fund our loans and have started a dialogue with Fannie Mae and Freddie Mac in the hopes there will be some other alternatives,” said WHEDA Executive Director Antonio Riley. “For now, we want to encourage potential borrowers to continue to come to WHEDA and get pre-approved for a WHEDA home loan so that when the market relaxes and we’re able to write more loans, they’re already in the pipeline.”
Last year, WHEDA issued $522 million in loans. It is the lender of first choice for many first-time home buyers who qualify.
“The suspension of WHEDA is by no means catastrophic, but it’s certainly not a plus for the real estate market,” said Brain Wickert, president of Accunet Mortgage in Butler. “There are other excellent programs such as FHA and regular privately insured low down-payment programs, but WHEDA has been the best program for first-time buyers for quite some time.”
Gov. Jim Doyle’s spokesman, Lee Sensenbrenner, stressed that the halt in mortgage lending by WHEDA isn’t permanent.
“What’s happened is that they’re taking temporary and responsible action based on current credit markets,” Sensenbrenner said.
In the ongoing financial crisis and housing slump, investors have been avoiding securities linked to mortgages.
A financial system rescue package awaiting House approval in Washington is intended to thaw markets by removing troubled assets such as mortgage-backed securities from the books of financial institutions.
William Malkasian, president of the Wisconsin Realtors Association, described the suspension of funding as “a temporary disappointment.”
“Is the timing good? No. But we don’t see this to be a permanent thing and we hope to get through it,” Malkasian said.
Agency still strong

WHEDA said the organization is financially sound, and that only 0.71% of its loans are seriously delinquent, compared to 1.23% for similar loans statewide.
Venne said WHEDA had net income in its 2008 fiscal year, which ended in June, of $34.6 million.
“We’re in a really good position financially,” Venne said. “It’s just that we don’t have access to the capital funds.”
Venne said WHEDA officials are hoping that the legislation in Congress to boost the ailing financial system will help solve the problem.
“Our hope is that whenever this rescue package goes through, that that will relax the capital markets to a point where we can start raising capital again,” Venne said.
Pre-approvals continue

Although WHEDA is not making new loans for single-family mortgages, those that already had been approved or had rates locked in will go through to closing, Venne said.
She also said people still can be pre-approved for a WHEDA mortgage, and the pre-approval will be good for 12 months.
But the loan won’t be made until the disruption in the capital markets ends.

The funny thing is that they said they are financially strong and were optimistic that the bailout would help "relax the capital markets" to encourage investment in our states bonds. However, decreased demand for bonds was a results of being bankrupt, not the lack of liquidity in the credit markets.

I wonder if individuals who purchased bonds as a result of this article can sue the state for literally providing false information regarding its financial state.... Pretty sure World Com went down for this. Maybe even that other little company in TX, Enron or something :goof