$$ 7 BILLION needed for california

[El_Federal]

just curious what does this mean for LEO's there?

[tpc]

One thing it means is that the voters are not going to recall the Governor for refusing to give the prison guards a raise.

More generally, I would expect a freeze on state hiring, including state law-enforcement positions, and a legislature and governor who will be opposed to giving anyone a raise. I think it could also presage a change in the public retirement system for new hires. Of course, it also means likely cutbacks in state programs.

[pulicords]

If the state stopped providing free services such as non-emergency medical aid and reduced fees for illegal aliens attending college, it wouldn't mean anything.

[Badkharma]

It means CA will get new short-term loans from the feds instead of thru the usual private sources so they can make their payments to budget line items. Due to the whole credit crunch, funding is tough to come by because financial institutions are unwilling to lend. It's a nasty cycle to be stuck in - if we don't get out of it, it is NOT going to be pretty. Take it from someone who works in the fixed-income asset management industry and sees the changes on a daily basis. Thank God the bailout passed. I'm a capitalist through and through, but right now the problem needed fixing - we can debate who's at fault later. Did you know at one point we were only about 700 trades away from an entire system lockup and market seizure? This would've meant an utter collapse of the entire financial system. There's a point where you let your kids roam free, but you're still gonna act when they run after that ball going into the street. I subscribe to a trader's blog on the east coast.

This one was written on Tuesday:


Why Main Street should support this rescue

You know its bad when my wife, who under normal circumstances immediately dozes off when I start talking economics, is checking finance blogs looking for news on the credit markets. She is getting into heated arguments with friends over the bail out legislation. And to top it off, she's made a request that I explain to non-finance people why they should support a massive bailout of Wall Street. So here is my case. Hopefully regular readers as well as people far removed from finance will find this stimulating if not convincing.

First let's think about how modern lending works. Pick any type of loan: student loan, car loan, credit card, home mortgage, small business loan, etc. Any time a loan is made, whether its to pay for meal with your credit card or to pay for tuition, someone actually has to come up with the cash to lend to you.

Where do lenders come up with this cash? Primarily three places.

-Deposits.

-Borrowing from investors or from other banks.

-Securitization. This means that the loan isn't held by the lender, but sold to investors.

Lenders don't want to use deposits to make loans right now, because there is serious risk of depositors suddenly demanding their cash. Remember that banks don't ever actually have enough cash to give all their depositors their money on any given day. So when depositors are nervous, banks are nervous.

Normally if too many depositors happened to take money out (not in a panic, but just by happenstance) the bank would simply borrow cash from another bank. That's nearly impossible right now. Banks are generally unwilling to lend to each other. Banks can still borrow from the Federal Reserve, but they are so desperate for cash right now that they are accepting any interest rate, and the Fed is finding it nearly impossible to control short-term interest rates. Today banks took overnight loans from the Fed at 7%, 3 1/2 times the target rate set by the Fed. This is historically unprecedented.

Banks also cannot sell loans to investors. Even loans that are backed by governmental guarantees, like certain student loans, are not sellable in the current environment. Forget about automobile loans or business loans.

So if banks and other lenders cannot get cash, they cannot lend it. So what? Isn't our society doing too much borrowing as it is? Maybe, but let's consider the consequences of a world with no lending.

First of all, there would be no housing market. Very few people can buy a house with cash. Housing prices would continue to fall for many years. The result would be that people would almost universally live in rented housing. Wealthy land lords would own all the housing in America, and would reap all the profits from rentals.

Second, there would be no secondary education. Like housing, the vast majority of people need loans to get a college education. Granted, colleges would probably pare back on the quality of the education offered in an attempt to lower their costs. Even so, it would likely be that only wealthy people could afford college. The income gap in our society would increase as a result.

It would also be extremely difficult for average people to start a new business. Most businesses require start-up capital, most of which is normally borrowed. In addition, many small businesses need working capital, which allows the business to make payroll while waiting for accounts receivable to come in. So here again, only the wealthy would be able to start new businesses.

How will this bailout help? Mostly by creating a outlet for banks to sell "troubled" loans. What constitutes "troubled" isn't yet known. But suffice to say the Treasury will mostly be buying mortgage loans that probably shouldn't have been made in the first place. The price paid to the bank will be less than face value, thus the bank will suffer losses. Hopefully enough of these loans will recover their full value that tax payers do not suffer large losses.

But its a mistake to assume that, as tax payers, we aren't already on the hook for this mess. Currently there is about $8.6 trillion in assets that the FDIC insures. The truth is that the FDIC is ultimately funded by tax payers. So as tax payers, we are already on the hook for bank's behavior. And for way more than $700 billion.

In addition, municipal governments are suffering greatly in this crisis. Not only are their facing the prospect of decreased property tax assessments, but the cost of funding municipal projects has skyrocketed recently. Today, 7-day floating rate municipal bonds are carrying interest rates above 8%, breaking all records. Who will ultimately pay for these extremely high interest rates? Tax payers.

I completely understand the visceral anger that many Americans feel about the situation we're in. I'm sick over the fact that its come to this. But this is what it's come to. We would be foolish, as Americans, to destroy our long-term economic prosperity just to satisfy our righteous anger with Wall Street.

If we don't do this bailout, Main Street will pay anyway, and pay much more dearly. So I would encourage you to write your Representative and tell him or her exactly that. You are angry at Wall Street, but you also want to see some justice for Main Street.

Feel free to e-mail this or send links. I don't really care about getting credit.

http://accruedint.blogspot.com/

[avalon42]

It means CA will get new short-term loans from the feds instead of thru the usual private sources so they can make their payments to budget line items. Due to the whole credit crunch, funding is tough to come by because financial institutions are unwilling to lend. It's a nasty cycle to be stuck in - if we don't get out of it, it is NOT going to be pretty. Take it from someone who works in the fixed-income asset management industry and sees the changes on a daily basis. Thank God the bailout passed. I'm a capitalist through and through, but right now the problem needed fixing - we can debate who's at fault later. Did you know at one point we were only about 700 trades away from an entire system lockup and market seizure? This would've meant an utter collapse of the entire financial system. There's a point where you let your kids roam free, but you're still gonna act when they run after that ball going into the street. I subscribe to a trader's blog on the east coast.

This one was written on Tuesday:



http://accruedint.blogspot.com/

This problem happened because of foreign war being waged in Iraq and Afghanistan, poor economy performance, rapid job loss due to corporate migration, unnecessary tax cuts/economic stimulus packages, predatory lending/qualifying people for credit limits beyond their means and expense. As a result, banks are unable to lend because they simply don't have the assets/funds to lend anymore (hence why all the banks are simultaneously being "acquired" by other banks. often with massive debt).

Capitalism means that the free market should correct itself. The market teeter-totters because investors want to get out before it hits the bottom, but also to prompt Congress to act faster on the bailout.

I'm still wondering why in the hell do we bother putting regulatory agencies in place if they aren't going to enforce anything. I hope to God that they spend a good portion of that $700B towards strict oversight.

[Badkharma]

Really, it was a whole chain of events and decisions spanning over a decade that led to this. The biggest out of all of them was the too easy credit that left people far over-extended though.

I agree, the regulatory system was and is a complete joke. The good that can come out of this is that the system is completely overhauled.

Capitalism / free markets work, but there is a point of complete failure of the system. We were (and still are) very close to that point.

[SharksFan]

http://www.latimes.com/business/la-fi-calif3-2008oct03,0,5726760.story?track=rss

Reading this article is pretty concerning. I've been invited to the CHP Academy in November, and will be coming from out of state. I'm hoping I'll have a job when I get there.... and if I do, I hope I'll be collecting a paycheck at the end of the month!

[DAL]

This problem happened because of foreign war being waged in Iraq and Afghanistan, poor economy performance, rapid job loss due to corporate migration, unnecessary tax cuts/economic stimulus packages, predatory lending/qualifying people for credit limits beyond their means and expense. As a result, banks are unable to lend because they simply don't have the assets/funds to lend anymore (hence why all the banks are simultaneously being "acquired" by other banks. often with massive debt).

Capitalism means that the free market should correct itself. The market teeter-totters because investors want to get out before it hits the bottom, but also to prompt Congress to act faster on the bailout.

I'm still wondering why in the hell do we bother putting regulatory agencies in place if they aren't going to enforce anything. I hope to God that they spend a good portion of that $700B towards strict oversight.

You left out the fact that California spends too much and has tax and regulatory systems that are anti-business. California makes excessive use of debt financing.

I think "predatory lending" is largely a term coined to allow irresponsible borrowers to shift the blame to others. The people who made out in those loans were mostly the brokers, appraisers and builders. The banks and investment bankers saw short-term gains and long-term losses.

[nobodyjr]

just curious what does this mean for LEO's there?

It means I don't get to take the POST classes I want to. Damn. Good training plus a free vacation... lost. I really wanted to take a parolee contact class in Huntington Beach later this month, and the OES week long officer safety school next year. :mad:

[avalon42]

You left out the fact that California spends too much and has tax and regulatory systems that are anti-business. California makes excessive use of debt financing.

I think "predatory lending" is largely a term coined to allow irresponsible borrowers to shift the blame to others. The people who made out in those loans were mostly the brokers, appraisers and builders. The banks and investment bankers saw short-term gains and long-term losses.

Oh yes, California. It's a great state, but really designed to be anti-business (especially towards small businesses).

What's choking the budget here is the Health and Human Services. There is just too much being handed out freely without developing competitive work skills (sad to say that even if a person were so trained, they would still have a problem getting a job because all of the companies are migrating to states or countries with a lower tax bracket/overhead expense!)

On the predatory lending, the fault lies with the companies that help to qualify a person for a home loan even though they know that their credit basis and income was insufficient. The percentage they pocket from the deals is all the motivation needed.

[SoCalSheriff]

On the predatory lending, the fault lies with the companies that help to qualify a person for a home loan even though they know that their credit basis and income was insufficient.

I don't buy it. The end user is the one responsible. The people who CHOOSE to ACCEPT the loans are ultimately responsible. They should know what they can and cannot repay.

I would have loved to move into a newer house a few years ago. But even though I qualified for a loan, I knew I couldn't realy afford it and stayed in my 60 year old house.

[Claver]

I don't buy it. The end user is the one responsible. The people who CHOOSE to ACCEPT the loans are ultimately responsible. They should know what they can and cannot repay.

I would have loved to move into a newer house a few years ago. But even though I qualified for a loan, I knew I couldn't realy afford it and stayed in my 60 year old house.

It was all just one massive pyramid scheme. Home prices were climbing monthly and everyone wanted to get in on it. Multi-millionaires were made overnight and the hear say drove people into a frenzy.

I remember last year I applied for a loan just to see what I could afford and they pre-qualified me for 450k. Mind you I only make 65k a year and I fell off my chair when I saw the amount. I knew I could never afford to pay the loan off but the temptation to join in on the buying/selling frenzy was there. At the time people were buying homes and reselling them for 100k profit a year or 2 later. Lucky for me my dad raised me with some common sense or else I would be broke right now along with so many others.

The blame cannot solely be placed on the buyers though. Just like many other things in life it takes 2 to tango and banks handing out money like they were didn't help.

[avalon42]

The blame cannot solely be placed on the buyers though. Just like many other things in life it takes 2 to tango and banks handing out money like they were didn't help.

I'm not saying that individuals are not partially responsible, but keep in mind that the banks approve the loan. The mortgage companies (could be banks too) also qualify a person based on income, credit score, assets, etc. When that risk was largely based on how much CREDIT a person "should" qualify for, that's where this went down hill.

That's why we all collectively pay for a bailout.

[DAL]

Why is it that no one else seems to think the builders bear any of the blame? Not only did they make huge profits, but they fueled the frenzy by increasing prices and then buying down the interest rate for a few years so that speculators could afford to buy them with the hope of flipping them at a profit? It seems fitting to me that Las Vegas is one of the cities that was hit the hardest. As usual, the gamblers got hosed.

[Up_On_Base]

As usual, the gamblers got hosed.

Dude - We are all getting hosed, there are so many factors in this cluster.

Multiple wars - Needed but expensive

Econonic downturn

People not having "personal responsibility" and taking loans they can't afford. I love the fact that %90 of homeowner pay on-time and are up to date but we should bail out other %10...what a joke.

There is plenty of blame to go around, both Rep/Dem. Of course no one will get jammed up and congress will be re-elected.

[DOAcop38]

Oh yes, California. It's a great state, but really designed to be anti-business (especially towards small businesses).

Small business does get screwed,and its often by LARGE business practices- THEY have local politicians in their back pockets,and have not problem with predatory business practices designed to create monopolies..


What's choking the budget here is the Health and Human Services. There is just too much being handed out freely without developing competitive work skills (sad to say that even if a person were so trained, they would still have a problem getting a job because all of the companies are migrating to states or countries with a lower tax bracket/overhead expense!)

true in one aspect- those companies that move out are looking more to nincrease the profit margin,and often really don't give a rats' tail about maintaining the system that services them- I often respond on a daily basis to alarm calls around my area in some business that has no emergency-that is man power hours and service that can go else where thats needed.Those companies also use the roads to ship or transport merchandise,as well as other gov't services they REALLY DON'T want to pay for,yet have no problem demanding. in society we are always going to have a portion of society that are chronically under employed or simply not employed,the idea is to cut down on that by offering "incentives" to employers such as lower taxes.

The problem is that the same companies that get these want "more" and in return want to give up less- great if the more they recieved was actualy passed along in terms of more employees( who become tax payers) but what often happens is the companies pocket the profit,and seek other areas to exploit lower taxes,and employees that can be paid less-All the while a few at the TOP get most of the profit,and the bottom folks continue to get less and less.This doesn't stop the rise in costs that the "less" have to pay,as those with "more" can afford it. if supply and demand actually worked the way it should ,certain things would be cheaper and certain things would cost more- we ,however are living in a time when products are sold with less volume and content,but cost more.The consumer is getting screwed,the worker is getting screwed,and the top tier investors and CEOS really don't care as long as they have "theirs".

As far as the Health and human services are concerned- The U.S. is the ONLY western nation that doesn't have a comprehensive national health care program- we can whine about how flawed other nations systems are,but that doesn't prevent our nation from coming up with a workable one- with 40 MILLION U.S. citizens( not counting illegal aliens) that don't have health care protection,but we consider ourselves the "Wealthiest" nation , something is truly wrong here. I blame both political parties and their rhetoric for the problem- Conservatives want everyone to "sink or swim" on their own- that stuff really doesn't work,and Liberals think that giving everything away to whomever asks works is wrong also.we need more emphasis on aid then transition- okay if you need welfare, but you are NOT going to live on it for ever.People come from all over the nation at one time to simply get on the CA. welfare program- they get more benefits here than other states! and only recently -in the last 2 yrs,has there been a stepping up in what we do toward illegal aliens.people have come here to Ca and become in trenched in the "reconquista" mindset,ala "this is rightfully theirs to take".There are also alot of people from other parts of the world,not just the nations that border us, that are here taking advantage of our system also-Until we get a Federal gov't that really gets tough on this issue( yet another example of La,e duck bush jrs failed administration) we will continue to get resources that rightfully should go to U.S. citizens,and indeed Californians, being used UP by people who are basically free loaders who take MORE than they contribute



On the predatory lending, the fault lies with the companies that help to qualify a person for a home loan even though they know that their credit basis and income was insufficient. The percentage they pocket from the deals is all the motivation needed.

PBS recently had a documentary on this very same issue- they showed how a 24 yr old in Sacramento,Ca was 3 million dollars in debt-all cause Mortgage companies and their agents were all to willing to LIE to make a profit-these folks faked his college students financial status to sell the loans. when the market swung up here in the early 2000s,everyone was scared they would never be able to buy a home- People took advantage of this panic- those SAME folks should see the inside of a prison...

[Copp'rPenny]

Bringing the discussion back to how the economy affects LE agencies, I heard today from one of my BIs that his organization is likely freeze hiring this week, and that the other big Orange County agencies (Anaheim, Huntington Beach, Santa Ana and Garden Grove) already have.

Anyone can confirm?

Although I list four agencies below, there is actually a fifth, another agency which placed me high on the eligibility list after the oral board. But in reality, I think I'm down to two healthy agencies. :(

[MarineLAR]

I know that Anaheim froze their hiring. I was scheduled for a written/PAT on the 18th, but I got an email yesterday stating that hiring is frozen indefinately.

[pulicords]

As far as the Health and human services are concerned- The U.S. is the ONLY western nation that doesn't have a comprehensive national health care program

DOA- I just got back from a couple weeks in Europe (Amsterdam to Budapest) and believe me "free comprehensive health care" ain't "free." I spent a few hours with police officers from two different agencies in the Netherlands and some from Hungary. You might get needed health care, but good luck being able to afford a nice home, car, vacations, etc... Those officers are paying more than 50% of their gross in taxes and that's before sales and property taxes (that are extremely high).

Routine medical needs are no problem, but if something serious happens and you need a specialist you'd better be prepared to wait in line.

The difference between here and there isn't the fact things cost money, it's the fact that the government decides where most of your income goes (ie: the government's pocket). At least in the U.S. there's still a possibility that health care companies can face competition. One thing we have that those in Europe don't though is an abundance of attorneys filing health related suits. Not so easy to do, when everything is nationalized!