Pasadena Chamber of Commerce

From the New York Times

Localities Want U.S. to Support Muni Bonds

State and local governments are asking Washington to give them something that banks are trying to get rid of: federal bailout money.

Doug Mills/The New York Times

Representative Barney Frank, shown, and Bill Lockyer, treasurer of California, both want federal help to back municipal debt.

Robert Galbraith/Reuters

Bill Lockyer, treasurer of California.

California is asking that money from the Treasury’s TARP, the Troubled Asset Relief Program, be used to help back more than $13 billion in short-term borrowings. Members of Congress and several municipalities want bailout money to be used to cover more than $1 billion in losses from investments by municipalities in debt issued by Lehman Brothers, the investment bank that went bust.

And Representative Barney Frank, chairman of the House Financial Services Committee, is drafting legislation that would have the Federal Reserve, and potentially the Treasury’s bailout money as well, stand behind floating-rate municipal bonds — a $400 billion market that provides short-term financing to municipalities, but which has been largely frozen in the current credit crisis.

Personally, I’d like to see California get its finances in order before accepting any money from the Feds.  Continuing to borrow our way out of California’s financial quagmire is not going to bring a long term, permanent solution.

Paul