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To: patron_anejo_por_favor who wrote (127699)	10/5/2001 12:27:40 PM
From: Dr. Jeff	Respond to of 436258

Yes, there must be a ton of huge problems out there. Seems like it may be a reason for a big "fu*k it rally." <ng> Did you see that California's looking at a possible downgrade? 10/05 11:35 California's $31.6 Bln Debt May Be Downgraded (Update1) By Dennis Walters Sacramento, California, Oct. 5 (Bloomberg) -- California's $31.6 billion of debt may be downgraded for the second time this year because of a slowing economy and delays in selling bonds to recover power costs, Moody's Investors Service said. The state's forecast of $12.5 billion in tax revenue tied to the stock market, including capital gains, ``now appears risky,'' and last month's terrorist attacks will slow economic growth more than California has expected, Moody's said in a statement. Moody's in May, citing legislative delays in approving the power bonds, lowered California general obligations to ``Aa3'' from ``Aa2.'' Downgrades cut the value of existing bonds and raise borrowing costs on new sales. California postponed a $500 million general obligation bond sale after the attacks and hasn't rescheduled it. Investors warned this week that California bonds may decline if state leaders don't address looming shortfalls. The California Department of Water Resources has spent $10.4 billion buying electricity on behalf of the state's investor-owned utilities. The department planned to sell $12.5 billion in bonds, the largest municipal debt sale in U.S. history, to repay the state's general fund for a $6.1 billion loan and other power costs. The sale has been delayed indefinitely. California Treasurer Philip Angelides said last week the state's projected budget deficit in fiscal 2003, which begins next July 1, may rise to $9.3 billion if the energy loan isn't repaid by then. A shortfall that large equals about 12 percent of the state's current general fund budget. Regulator Rejection Stock option and capital gains related tax collections ``are a key source of vulnerability,'' Moody's said. The state's forecast of $12.5 billion in such taxes translates to about 16 percent of general fund revenue. Standard & Poor's cut California's general obligation rating to ``A+'' from ``AA'' in April because of the state's mounting power costs. Among states, only Louisiana has a lower credit rating from S&P. California still ranks ahead of Louisiana and New York on Moody's scale. The California Public Utilities Commission on Tuesday voted 4- to-1 against a plan that would require the regulator to raise utility rates as needed to back the bonds. The commissioners said they oppose losing oversight over the state's power spending and also favor an alternate approach for selling the bonds that Governor Gray Davis opposes. That impasse is a concern because bond proceeds ``are needed to shore up the state's now more precarious'' projected cash position, Moody's said. S&P said this week that it doesn't plan ``immediate rating action'' after the regulator rejected the bond proposal, adding that the two-notch downgrade factored in the possibility of delays.

To: patron_anejo_por_favor who wrote (127699)	10/5/2001 12:43:37 PM
From: TRINDY	Respond to of 436258

Patron--This is the process of printing money. Back in my Economics of Money and Banking classes, we used to study such transactions in what were known as T-accounts. When the Treasury sells bonds, brokers and dealers write a check on their banks and excess reserves, which banks can loan out, are reduced. But the Fed, through open market operations seeks to inject liquidity into the system. It buys the bonds from the public, writing a check on itself, which restores bank reserves. This process is called "monetizing the debt." Net, it operates like the Fed buying directly from the treasury. A very dangerous process in the long run. Cheers!