Friday, October 24, 2008

Look Out: State Bail Out Package

DOWWTF has reports that Goldman's about to lay off 10,000, and that a number of US states are gearing up to pitch the federal government for a bail out package of their own.

Let's take New York itself. The state relies on Wall Street (directly) for 20% of its funds. Albany taxes bank profits, and when there are only bank losses, that means there's no tax to pay. Period. And it all trickles down from there. The New York State deficit jumped from a projected $5 billion to almost $13 billion in the last two months.

In '09, look for a number of states to petition the federal government, en banc, for a bailout package of their own. And the size of that mess is going to be achingly huge. The (federal) government baling out the (state) government by printing T-bills?! How is that sustainable?