Also in this playlist...
This transcript is automatically generated
To the Treasury Secretary today hey hey we need some money can't keep going yeah.
I know a lot of it.
I'll be bought.
We a lot of -- -- not to happy hour former California governor gray Davis Love and happy hours are now seriousness that this apparently I.
You're -- stay at my home -- -- and they California.
On the verge of not being able thank you not being able to pay teachers and that they in the school -- -- Our viewers exactly the -- that Californians and.
Well first let me say that day.
Internal borrowing throughout the year is a normal practice what's abnormal this year is a credit markets -- seized out.
It the budget was 85 days late and it's not clear that the financial markets can put together the money.
The state needs by October 28 when -- runs out of cash to pay schools and pay other important.
Find out important public project so I think governor did the right thing by by saying to the treasury as secretary hey look.
Where the city California we stand behind our obligations but we need money and -- in four weeks that we can't get a from the private sector where you will you help us out.
Governor Davis artists say you know another two months down the road and even if they used to say are -- -- -- -- -- because it was seven billion dollar bridge loan but that the credit markets continue their troubles markets that -- stock markets down at 9000.
What happens then I mean how bad can this really get in the next few weeks.
And -- it right he could get worse because marches and next time that there were treated -- and cash.
And it cost of borrowing if it's available at all could be a great deal higher.
We won't have the problem of not having a budget in place -- we don't have the timing problems but the cost could be you know in the low teens.
Are high single digits traditionally you borrow money -- summer between three and 5%.
-- Eric -- I watched that interview that ex governor now attorney general Jerry -- -- -- Neil Cavuto just about an hour ago.
And he was basically saying yes California needs -- money but you know in the event they didn't get this -- didn't get this money.
Somehow they'd make do and and and David fix the problem on around so my question is.
Is it imperative that you get this seven billion dollars or back we'll California make it through the spot prices.
Like they always have in the past it in and -- -- by any chance just exploiting opportunities -- you know I had.
A lot of money sitting at a table you want seven billion of it.
First -- all know it's gonna lead this money without charging -- a lot of interest.
So they're not gonna do it and let's say they can make money off at the state is never defaulted on its obligations and does an intensive.
You know attorney general brown is right in this sense that we don't get the money yes we can close -- thousand schools we can lay off.
California conservation workers who work at minimum wage and help firefighters.
And other disaster relief workers when their natural disasters yes we can do that.
But I don't think that's -- kind of service that the people California want to see and I don't think America one wants to see that happen in and America's largest state.
Black communities follow that up so you saying if you don't get seven billion dollars if you have to close schools and lay off workers right away.
Yes because if you don't have cash.
You can't ask people working he can't pay them and typically the state pays it's employees at the end of the month.
So they would have worked a full month of October and if you can't pay them then you -- at school employees.
School teachers principals.
To negated go to work in November if he hadn't paid them for October now they might do it.
And events you might find a way to pay them but you have to be prepared for the consequences if you don't have the money.
Yeah in fact gadget that would -- that really strong teachers union.
Now they're in California by some of those protests that you shut down singles out bad tennis is.
Hey not want any -- us here.
I'm sorry this satellite delay -- talking over each other I'm sorry we do you want to bring in however out California treasurer.
Bill Lockyer he's on the telephone -- that she's in the midst of this potential crisis there in California.
-- here I'll what -- the Treasury Secretary say to.
Your current Governor Schwarzenegger.
Is this in the process.
But this deal being down will you get seven billion dollars alone.
From the Treasury Department.
What you need to understand that play and -- -- me is that hope that the congressional action.
Causes -- Law a -- in the credit markets that we can.
Do you are routine traditional borrowing in the public market.
So that's our current plan we've been working on it for a while and it'll be awhile before we'll know for sure whether that successful or not.
Plan -- is to.
Go and use the provision that was in the bill that passed that allows the treasury to provide liquidity before.
State local government but that's.
-- down the road and not the focus of our attention currently.
They don't build.
Sorry a treasury -- you're gonna ask you this great as I look at the bill is it possible that let let them actually as I look at the letter that Schwarzenegger sent to.
The federal government and just sort of saying he might need -- a million dollars but almost sort of a political ploy for him trying to persuade some boats to get that.
This trillion dollar will Wall Street bailout package passed but -- what the mentality was and maybe there isn't even a crisis it's more of a political ploy.
I think you know of media activity in this motivation but they're already -- A lots of discussion about the credit crisis and the -- in nature of borrowing all over the country for state and local government.
As information had been available to people for.
A couple of days.
So the fact that there might be treasury blown you know doesn't add anything new that.
lockyer -- like you just take us through the process real quickly in layman's terms how this bill may actually help some of the credit.
-- that's going on in California seizing up your ability to borrow and loan how that affects you.
Well we normally borrow -- -- all because of the short term note.
Because the money comes did in the spring and come -- who took on and that pretty routine.
This year we think we need between six and seven billion dollars probably.
And the bill hope.
The bill hopefully mean.
That the current lock.
Tight credit market -- -- and we can't borrow anything.
That that will lose than that -- testers will be it will mean it.
Purchase these kinds of notes that money will be flowing again.
That's not just lots of other -- all of this book.
Treasure -- lot of bring back in the former governor of California Gray Davis mr.
Again people are still saying hey what about the homeowners and I know they -- in California IE it is that such a dire situation for some people.
Will this all do you think -- help the residents in your state bear -- the homeowners who are facing foreclosure.
Well it as senate treasurer lockyer said hopefully the bill will.
Will loosen up some credits and people if able to borrow money but there's another change it has to take place.
We have to change the rules we cannot allow.
-- to provide mortgages to people who have no money down and don't you have to document that they're working.
And that's a prescription for disaster and we're experiencing that disaster firsthand so going forward.
We have to change the rules by which people can obtain a mortgage and as I said before.
You have to have some skin in the game you're gonna have to -- -- 30% down and that means not every one.
We'll get a home but it also means the nation won't have to go through this wrenching disaster that -- going through now and unfortunately I suspect will be with us for awhile.
Just to follow up on that quickly -- -- granite running out of time but a lot of people are saying that governor that the CRA.
You know making loans available to more people east Los Angeles is to blame.
What do you think you agree.
No I think there's a way you can structure loans for people of all income levels but they have to have some equity.
There has to be sums they have to have some stake in the house.
Otherwise when the market collapses they'll just walk away from the house that doesn't do the bank -- good doesn't do the neighborhood any good and doesn't do the former homeowner -- good so we have to have rules.
Where people have skin in the game they have actually their homes and they're able to access.
All mortgage -- the way we had it before it was kind of Katie bar that would bar the door -- -- -- you can't have been -- being.
With one dollar borrowing 100 and leveraging at a hundred to one that doesn't work the dollars.
The one dollar diminish -- 1% Midland -- well that's what Wall Street did they can't do that in -- -- -- You all very much -- a -- -- thank you both guys.
Filter by section