- Jan 31, 2005
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Interesting. I dont have much to say, I believe I said my piece on the matter in the Cali thread. While Cali is the biggest problem, it certainly wont be the laast. Seems that may prove to be true.
Does 007 have Daves powers of foretelling the future? It would seem so.......
Article
Mass. may seek a US loan as credit markets dry up
State Treasurer Timothy P. Cahill this week approached the US Treasury and the Federal Reserve Bank of Boston about lending Massachusetts money under the same extraordinary terms the government is giving banks and Wall Street firms during this financial crisis.
The request was prompted by the state's inability to borrow from the short-term debt markets because the financial turmoil has essentially caused credit markets to stop lending or charge prohibitive rates. Earlier this week, Cahill's office shelved a $750 million debt offering because there were no buyers for state or municipal debt, he said. He did say how much the state might want to borrow from the Fed.
Massachusetts' need is not as urgent, Cahill said, as the state of California's, which requested similar federal assistance on Thursday. California officials said the state would run out of money by the end of the month if the short-term debt markets do not ease, and if it could not obtain loans from the Fed.
Cahill said the state has enough available funds to cover its expenses for the coming weeks. But he would not predict when the government would run into a cash shortfall should the borrowing problems persist.
Federal officials have not yet responded to Cahill's request, he said yesterday. Officials at the Boston Fed and US Treasury did not return calls seeking comment.
The treasurer is going to try to float the $750 million offering again next week. Cahill and other government treasurers hope the passage of the federal bail-out package yesterday will calm credit markets and revive sales of municipal debt.
"We have been preparing all week for contingencies around the fact that, if we don't get access to the credit markets next week, what are our alternatives?," he said.
However, the borrowing problems come as Massachusetts struggles to deal with a sharp drop-off in tax payments. Governor Deval L. Patrick and state legislators on Thursday disclosed the first in what could be a series of cuts to programs and operations after revenues for the fiscal first quarter were $143 million lower than expected.
Meanwhile, if the credit markets remain tight, Cahill said the Fed should offer the state the same low-rate loans or assistance the central bank has been giving the nation's banking system during the credit crisis.
"That's all we would ask them to do: Treat us like the investment banks," Cahill said.
State and local governments and other tax-exempt borrowers sold about 15 percent less debt in this week in credit markets than in typical periods, according to data compiled by Bloomberg.
One major obstacle for governments - and private companies, too - is that a major buyer of the short-term debt they issue, the $3.4 trillion money market mutual fund industry, is sitting on the sidelines, too, analysts say.
Matt Fabian, managing director at Municipal Market Advisors, a research firm in Concord that follows government debt markets, said, "Money markets have been getting comfortable sitting on cash as opposed to buying bonds."
One reason for the reticence of money market mutual funds, he said, is that the insurance companies that routinely back up the debts they buy are themselves financially weak, adding to the nervousness about holding those securities.
Also, he said these mutual funds feel they need to have more cash on hand than normal to repay anxious customers who want their money back. Two weeks ago, money market mutual funds were the scene of panic as investors withdrew $210 billion out of fear their money was not safe; Putnam Investments of Boston was forced to close a $12.3 billion fund because of an onslaught of redemption requests. Also, several funds saw their net asset values fall below the $1-a-share level because of money-losing investments -meaning their shareholders stood to get less than $1 back for every $1 they had invested.
"You can't quite tell when the next wave of panic will come," Fabian said. "At this point, money markets should be cautious."
Fidelity Investments, the nation's largest money market manager, has $500 billion in money market mutual funds. One person involved in selling government debt to Fidelity and other money market fund managers said the Boston investment giant had cut back on buying certain government debt in recent days. But a spokesman for Fidelity said it had not retreated from that market.
"We remain a very active participant," Fidelity spokesman Vincent Loporchio said.
The US government recently took steps to ease the pressures on the money market mutual fund industry by temporarily insuring accounts and helping fund managers with cash-flow problems. Yet the markets still remain tight.
Now, some financial analysts are predicting the passage of the bailout yesterday would lead to credit markets loosening in the coming days, though it might be weeks before conditions begin to return to normal.
Does 007 have Daves powers of foretelling the future? It would seem so.......
Article
Mass. may seek a US loan as credit markets dry up
State Treasurer Timothy P. Cahill this week approached the US Treasury and the Federal Reserve Bank of Boston about lending Massachusetts money under the same extraordinary terms the government is giving banks and Wall Street firms during this financial crisis.
The request was prompted by the state's inability to borrow from the short-term debt markets because the financial turmoil has essentially caused credit markets to stop lending or charge prohibitive rates. Earlier this week, Cahill's office shelved a $750 million debt offering because there were no buyers for state or municipal debt, he said. He did say how much the state might want to borrow from the Fed.
Massachusetts' need is not as urgent, Cahill said, as the state of California's, which requested similar federal assistance on Thursday. California officials said the state would run out of money by the end of the month if the short-term debt markets do not ease, and if it could not obtain loans from the Fed.
Cahill said the state has enough available funds to cover its expenses for the coming weeks. But he would not predict when the government would run into a cash shortfall should the borrowing problems persist.
Federal officials have not yet responded to Cahill's request, he said yesterday. Officials at the Boston Fed and US Treasury did not return calls seeking comment.
The treasurer is going to try to float the $750 million offering again next week. Cahill and other government treasurers hope the passage of the federal bail-out package yesterday will calm credit markets and revive sales of municipal debt.
"We have been preparing all week for contingencies around the fact that, if we don't get access to the credit markets next week, what are our alternatives?," he said.
However, the borrowing problems come as Massachusetts struggles to deal with a sharp drop-off in tax payments. Governor Deval L. Patrick and state legislators on Thursday disclosed the first in what could be a series of cuts to programs and operations after revenues for the fiscal first quarter were $143 million lower than expected.
Meanwhile, if the credit markets remain tight, Cahill said the Fed should offer the state the same low-rate loans or assistance the central bank has been giving the nation's banking system during the credit crisis.
"That's all we would ask them to do: Treat us like the investment banks," Cahill said.
State and local governments and other tax-exempt borrowers sold about 15 percent less debt in this week in credit markets than in typical periods, according to data compiled by Bloomberg.
One major obstacle for governments - and private companies, too - is that a major buyer of the short-term debt they issue, the $3.4 trillion money market mutual fund industry, is sitting on the sidelines, too, analysts say.
Matt Fabian, managing director at Municipal Market Advisors, a research firm in Concord that follows government debt markets, said, "Money markets have been getting comfortable sitting on cash as opposed to buying bonds."
One reason for the reticence of money market mutual funds, he said, is that the insurance companies that routinely back up the debts they buy are themselves financially weak, adding to the nervousness about holding those securities.
Also, he said these mutual funds feel they need to have more cash on hand than normal to repay anxious customers who want their money back. Two weeks ago, money market mutual funds were the scene of panic as investors withdrew $210 billion out of fear their money was not safe; Putnam Investments of Boston was forced to close a $12.3 billion fund because of an onslaught of redemption requests. Also, several funds saw their net asset values fall below the $1-a-share level because of money-losing investments -meaning their shareholders stood to get less than $1 back for every $1 they had invested.
"You can't quite tell when the next wave of panic will come," Fabian said. "At this point, money markets should be cautious."
Fidelity Investments, the nation's largest money market manager, has $500 billion in money market mutual funds. One person involved in selling government debt to Fidelity and other money market fund managers said the Boston investment giant had cut back on buying certain government debt in recent days. But a spokesman for Fidelity said it had not retreated from that market.
"We remain a very active participant," Fidelity spokesman Vincent Loporchio said.
The US government recently took steps to ease the pressures on the money market mutual fund industry by temporarily insuring accounts and helping fund managers with cash-flow problems. Yet the markets still remain tight.
Now, some financial analysts are predicting the passage of the bailout yesterday would lead to credit markets loosening in the coming days, though it might be weeks before conditions begin to return to normal.
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