Comments on: California’s Exploding Debt Problem http://www.geldpress.com/2008/10/californias-exploding-debt-problem/ Finance, Stock Options, Politics, Economics, Stock Market News, and Technology. Fri, 16 Jul 2010 20:21:48 -0700 http://wordpress.org/?v=2.8.4 hourly 1 By: States Use Derivative Gambling To Hide Debt | Geldpress http://www.geldpress.com/2008/10/californias-exploding-debt-problem/comment-page-1/#comment-1495 States Use Derivative Gambling To Hide Debt | Geldpress Tue, 30 Mar 2010 16:59:42 +0000 http://www.geldpress.com/?p=144#comment-1495 [...] reported on California’s exploding debt problem back in 2008.  Since that time, the problem has gotten magnitudes worse, not only for California, [...] [...] reported on California’s exploding debt problem back in 2008.  Since that time, the problem has gotten magnitudes worse, not only for California, [...]

]]> By: geldpress http://www.geldpress.com/2008/10/californias-exploding-debt-problem/comment-page-1/#comment-952 geldpress Sat, 04 Jul 2009 21:32:48 +0000 http://www.geldpress.com/?p=144#comment-952 Never before in history have so many enormous financial institutions failed and gone out of existence - Lehman Brothers, Bear Stearns, Washington Mutual to name a few. Yet the debt of all of these were rated very high by the useless rating agencies right up through the collapse. The muni's may have never failed because they kept kicking the "can of debt" down the road. This worked as long as the state revenue was increasing over time. But there comes a time when the can is no longer "kickable" and that time is now. Never before in history have so many enormous financial institutions failed and gone out of existence – Lehman Brothers, Bear Stearns, Washington Mutual to name a few. Yet the debt of all of these were rated very high by the useless rating agencies right up through the collapse. The muni’s may have never failed because they kept kicking the “can of debt” down the road. This worked as long as the state revenue was increasing over time. But there comes a time when the can is no longer “kickable” and that time is now.

]]> By: Keith kamen http://www.geldpress.com/2008/10/californias-exploding-debt-problem/comment-page-1/#comment-949 Keith kamen Fri, 03 Jul 2009 11:32:57 +0000 http://www.geldpress.com/?p=144#comment-949 Oh ya, annual interest alone in 2003 on all California Municipal Bond Debt was $9 billion. My guess is more like $50 billion today for just annual interest. Keith kamen Oh ya, annual interest alone in 2003 on all California Municipal Bond Debt was $9 billion. My guess is more like $50 billion today for just annual interest.

Keith kamen

]]> By: Keith kamen http://www.geldpress.com/2008/10/californias-exploding-debt-problem/comment-page-1/#comment-948 Keith kamen Fri, 03 Jul 2009 11:28:20 +0000 http://www.geldpress.com/?p=144#comment-948 Lease revenue debt is the difference of property tax revenue minus total costs of all leases outstanding which are held on private property. It's County agencies that usually make up the majority of states' lease revenue debt and it Counties that usually account for just as much of the municipal bond debt as the local level. The state level of muni debt accounts for far less of an amount than either County or local. Counties are notorious for issuing useless Muni-Bonds all at the expense of taxpayers. In recent years it's these same useless municipal bonds that make up the majority of most government debt. These useless bonds are loaded with derivatives, excessive broker fees, and outrageous yields. Officials justify these costs by inflated property values and future forecasts on tax revenue. All while lately all these bonds only end up going to pet projects such as parks, public facilities, utility companies, joint ventures, and many times just refinancing old bonds for a fee. Not only in California, but world wide, this new phenomenon of unregulated banks ruthlessly overcharging on the underwriting of the loans for these municipal bonds have by some estimates, account for at least a third of all government debt world wide. With this new phenomenon being unregulated these banks legally rob tax payers blindly with all these excessive charges by simply offering kick backs to officials for not soliciting any public bids by other banks and never finding out what real market costs are for a bond issuer. It has recently been discovered that the total costs paid up front for fees, interest, and derivatives on several bonds issued by California make up more than 50% of the entire loan amount of the bond issue. It's also noted that never in history has a Municipal Bond in California let alone the entire U.S. except for only two little known cases has ever defaulted. So can anyone then tell me how in the world do these credit rating agencies which in many cases are also the bond issuer justify these low credit ratings on Muni-Bonds that demand such high yields? I would love to know. Thank you. Keith Kamen Lease revenue debt is the difference of property tax revenue minus total costs of all leases outstanding which are held on private property. It’s County agencies that usually make up the majority of states’ lease revenue debt and it Counties that usually account for just as much of the municipal bond debt as the local level. The state level of muni debt accounts for far less of an amount than either County or local. Counties are notorious for issuing useless Muni-Bonds all at the expense of taxpayers. In recent years it’s these same useless municipal bonds that make up the majority of most government debt. These useless bonds are loaded with derivatives, excessive broker fees, and outrageous yields. Officials justify these costs by inflated property values and future forecasts on tax revenue. All while lately all these bonds only end up going to pet projects such as parks, public facilities, utility companies, joint ventures, and many times just refinancing old bonds for a fee. Not only in California, but world wide, this new phenomenon of unregulated banks ruthlessly overcharging on the underwriting of the loans for these municipal bonds have by some estimates, account for at least a third of all government debt world wide. With this new phenomenon being unregulated these banks legally rob tax payers blindly with all these excessive charges by simply offering kick backs to officials for not soliciting any public bids by other banks and never finding out what real market costs are for a bond issuer. It has recently been discovered that the total costs paid up front for fees, interest, and derivatives on several bonds issued by California make up more than 50% of the entire loan amount of the bond issue. It’s also noted that never in history has a Municipal Bond in California let alone the entire U.S. except for only two little known cases has ever defaulted. So can anyone then tell me how in the world do these credit rating agencies which in many cases are also the bond issuer justify these low credit ratings on Muni-Bonds that demand such high yields? I would love to know. Thank you.

Keith Kamen

]]> By: Bonds Are Taxes | EcoWorld http://www.geldpress.com/2008/10/californias-exploding-debt-problem/comment-page-1/#comment-887 Bonds Are Taxes | EcoWorld Sun, 24 May 2009 21:31:29 +0000 http://www.geldpress.com/?p=144#comment-887 [...] on the growth of California’s state government debt can be found in the post “California’s Exploding Debt,” recently published on the excellent website GeldPress.  It is probably not unreasonable to [...] [...] on the growth of California’s state government debt can be found in the post “California’s Exploding Debt,” recently published on the excellent website GeldPress.  It is probably not unreasonable to [...]

]]> By: Dennis Cardoza Home Act Pushes for Unaffordable Housing | Geldpress http://www.geldpress.com/2008/10/californias-exploding-debt-problem/comment-page-1/#comment-882 Dennis Cardoza Home Act Pushes for Unaffordable Housing | Geldpress Wed, 20 May 2009 05:44:22 +0000 http://www.geldpress.com/?p=144#comment-882 [...] HUD secretary Donovan to recognize that California needs more help (translation: more bailouts for irresponsible government and mortgage borrowers)  than the rest of the [...] [...] HUD secretary Donovan to recognize that California needs more help (translation: more bailouts for irresponsible government and mortgage borrowers)  than the rest of the [...]

]]> By: Calwatcher http://www.geldpress.com/2008/10/californias-exploding-debt-problem/comment-page-1/#comment-868 Calwatcher Tue, 05 May 2009 01:38:46 +0000 http://www.geldpress.com/?p=144#comment-868 Ha! Looking through the 2008 Treasurer's report, it looks like the only reason the state isn't even deeper in the hole is that they've issued almost none of the bonds authorized in the 2006 $37 billion bond authorizations. Maybe because the state started having problems with its bond rating soon thereafter? Ha! Looking through the 2008 Treasurer’s report, it looks like the only reason the state isn’t even deeper in the hole is that they’ve issued almost none of the bonds authorized in the 2006 $37 billion bond authorizations. Maybe because the state started having problems with its bond rating soon thereafter?

]]> By: Goal Of Deficit Cutting Is Stupid | Geldpress http://www.geldpress.com/2008/10/californias-exploding-debt-problem/comment-page-1/#comment-598 Goal Of Deficit Cutting Is Stupid | Geldpress Mon, 23 Feb 2009 19:16:35 +0000 http://www.geldpress.com/?p=144#comment-598 [...] California’s Exploding Debt Problem [...] [...] California’s Exploding Debt Problem [...]

]]> By: Private Worker http://www.geldpress.com/2008/10/californias-exploding-debt-problem/comment-page-1/#comment-488 Private Worker Fri, 09 Jan 2009 21:03:04 +0000 http://www.geldpress.com/?p=144#comment-488 While I agree with your concern about ballooning debt - by local government, state government, national government, private industry, and individuals - I think it's useful to put things into perspective. 1) If you were looking at your personal finances, would you look at only your total debt to be paid over many years as a ratio to your single year income, or also look at your annual payments as a proportion of your annual income? The latter is also a pretty meaningful figure, closer to apples to apples in terms of annual budgets, not just some sleight of hand to hide the truth. If you were to say that the amount California is obligated to pay off over coming decades amounts to 60% of this year's income, it doesn't sound as dramatic. For me, it's still a serious concern - especially because of the growth rate, but feels like less of a scare tactic. If California could freeze the ratio today (pretty hard to do during a recession unfortunately), it would probably be affordable if not fun. But if it increases too fast - big problem. 2) By the way, could you give the above table of debt over the years as a proportion of the annual income in each of those years? That would give us a better perspective on the growth rate of debt RATIO, which is more real concern than absolute numbers. It could be better or worse than your first pass analysis. 3) Are you sure that the $4.42 billion annual cost is for interest only as you state, and does not include paying off any principle? If that is true, then indeed it's a deceptive figure which needs to be challenged. Just paying interest is not fully servicing a debt (as some homeowners with temporary interest-only mortgages are finding out). 4) By the way, another apples to oranges concern: it appears that you may be comparing bond ratings standards with accounting practices standards. While both include the English word "standards" and have something to do with finance, they are in quite different financial areas and are regulated or evaluated by very different entities for different purposes. A business with impeccable A+ accounting can easily be terrible D bond risk, for example. It's quite possible that municipalities may be held to a tighter standard in one area than are private firms, and to a looser one in the other, without any irony or hypocrisy involved. Thanks for keeping an eye out! I aim to help your surveillance improve, not to discount your efforts. While I agree with your concern about ballooning debt – by local government, state government, national government, private industry, and individuals – I think it’s useful to put things into perspective.

1) If you were looking at your personal finances, would you look at only your total debt to be paid over many years as a ratio to your single year income, or also look at your annual payments as a proportion of your annual income? The latter is also a pretty meaningful figure, closer to apples to apples in terms of annual budgets, not just some sleight of hand to hide the truth.

If you were to say that the amount California is obligated to pay off over coming decades amounts to 60% of this year’s income, it doesn’t sound as dramatic. For me, it’s still a serious concern – especially because of the growth rate, but feels like less of a scare tactic. If California could freeze the ratio today (pretty hard to do during a recession unfortunately), it would probably be affordable if not fun. But if it increases too fast – big problem.

2) By the way, could you give the above table of debt over the years as a proportion of the annual income in each of those years? That would give us a better perspective on the growth rate of debt RATIO, which is more real concern than absolute numbers. It could be better or worse than your first pass analysis.

3) Are you sure that the $4.42 billion annual cost is for interest only as you state, and does not include paying off any principle? If that is true, then indeed it’s a deceptive figure which needs to be challenged. Just paying interest is not fully servicing a debt (as some homeowners with temporary interest-only mortgages are finding out).

4) By the way, another apples to oranges concern: it appears that you may be comparing bond ratings standards with accounting practices standards. While both include the English word “standards” and have something to do with finance, they are in quite different financial areas and are regulated or evaluated by very different entities for different purposes. A business with impeccable A+ accounting can easily be terrible D bond risk, for example. It’s quite possible that municipalities may be held to a tighter standard in one area than are private firms, and to a looser one in the other, without any irony or hypocrisy involved.

Thanks for keeping an eye out! I aim to help your surveillance improve, not to discount your efforts.

]]> By: EcoWorld - Editor’s Commentary » Blog Archive » Bonds Are Taxes http://www.geldpress.com/2008/10/californias-exploding-debt-problem/comment-page-1/#comment-158 EcoWorld - Editor’s Commentary » Blog Archive » Bonds Are Taxes Wed, 22 Oct 2008 16:53:10 +0000 http://www.geldpress.com/?p=144#comment-158 [...] on the growth of California’s state government debt can be found in the post “California’s Exploding Debt,” recently published on the excellent website GeldPress.  It is probably not unreasonable to [...] [...] on the growth of California’s state government debt can be found in the post “California’s Exploding Debt,” recently published on the excellent website GeldPress.  It is probably not unreasonable to [...]

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