California is a greater risk than Greece, warns JP Morgan chief

Discussion in 'Economics' started by Tom B, Feb 28, 2010.

  1. Tom B

    Tom B

    California is a greater risk than Greece, warns JP Morgan chief

    Jamie Dimon, chairman of JP Morgan Chase, has warned American investors should be more worried about the risk of default of the state of California than of Greece's current debt woes.

    By James Quinn, US Business Editor in New York
    Published: 8:20PM GMT 26 Feb 2010

    Mr Dimon told investors at the Wall Street bank's annual meeting that "there could be contagion" if a state the size of California, the biggest of the United States, had problems making debt repayments. "Greece itself would not be an issue for this company, nor would any other country," said Mr Dimon. "We don't really foresee the European Union coming apart." The senior banker said that JP Morgan Chase and other US rivals are largely immune from the European debt crisis, as the risks have largely been hedged.

    California however poses more of a risk, given the state's $20bn (£13.1bn) budget deficit, which Governor Arnold Schwarzenegger is desperately trying to reduce.

    Earlier this week, the state's legislature passed bills that will cut the deficit by $2.8bn through budget cuts and other measures. However the former Hollywood film star turned politician is looking for $8.9bn of cuts over the next 16 months, and is also hoping for as much as $7bn of handouts from the federal government.

    Earlier this week, John Chiang, the state's controller, said that if a workable plan to reduce the deficit and increase cash levels is not reached soon, he will have to return to issuing IOU's, forcing state workers to take additional unpaid leave and potentially freezing spending.

    Last summer, California issued $3bn of IOU's to creditors including residents owed tax refunds as a way of staving off a cash crisis.

    "I can't write checks without money; that's against the law. My main goal is to keep the state afloat, but I won't be able to do it without the help of new legislation," said Mr Chiang.
  2. Lethn


    Cool, maybe they'll realize soon that it's happening everywhere and they can't afford to bail people out all the time and not inflate the damn currencies anymore.
  3. 377OHMS


    The last time Mr. Chiang decided to issue IOUs most salaried people living in the state adjusted their exemptions so that they would owe money at tax time and avoid any IOU.

    You don't loan money interest free to a derelict impulsive spender.

    One other way they are robbing the populace is vehicle registration fees which more than doubled recently. I'm noticing quite a few people out in my area without current tags. I wonder if that is a trend?

    I'm guessing there will be some serious attack on Proposition-13 which prevents property taxs from being raised more than 2% per year. There are people that want that overturned.

    I personally hope that state lawmakers are prevented from raising taxs. I would be delighted to see the whole thing unravel and the street lights go dark. The liberal experiment that is California must be allowed to fail and must not be bailed out by the working class of the other states in the US.

    Are you going to make some steelworker in Ohio subsidize people living in Beverly Hills or San Francisco?