Wall Street, the Statehouse and the Loan Shark
Everyone's been asking how the Wall Street mess affects Main Street. Well, there's one clue in how it is starting to affect states. In this ...
Well, there's one clue in how it is starting to affect states. In this story from the Boston Globe , Massachusetts State Treasurer Timothy P. Cahill takes note of the immediate effect the credit-shortage (not quite a freeze yet) is having here and now in his state:
In need of $1.3 billion in quarterly payments for cities and towns -- money those localities use to fund everything from teachers to trash collections -- Cahill said he "has had to jump through a complex set of financial hoops to make it work."
The borrowing maneuvers are not uncommon -- that's how states make payments before the tax revenue comes in. What's uncommon are the rates the state is having to pay to do that short-term borrowing -- 6 percent, rather than the more normal 2 percent.
"This stuff is unheard of," Cahill said. "It's like going to the loan shark for money."