Good News For California: The Senate Votes To Preserve Unlimited Bailout For States

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Good news for the America’s Greece.

As part of the ongoing financial reform debate, the Senate has voted to strike down an amendment proposed by Senator Judd Gregg that would have capped bailouts to the states. According to Senatus, the vote failed 47-50, which is not really that close, considering the amendment needed 60 votes to pass.

As the text below describes, the amendment would have drastically limited the ability of DC to buy up state debt, a la the ECB and Greece.

    (a) In General.—Notwithstanding any other provision of law, no Federal funds may be used to purchase or guarantee obligations of, issue lines of credit to or provide direct or indirect grants-and-aid to, any State government, municipal government, local government, or county government which has defaulted on its obligations, is at risk of defaulting, or is likely to default, absent such assistance from the United States Government.

    (b) Limit on Use of Borrowed Funds.—The Secretary shall not, directly or indirectly, use general fund revenues or funds borrowed pursuant to title 31, United States Code, to purchase or guarantee any asset or obligation of any State government, municipal government, local government, or county government or to otherwise assist such governments, in any instance in which the State government, municipal government, or county government has defaulted on its obligations, is at risk of defaulting, or is likely to default, absent such assistance from the United States Government.

    (c) Limit on Federal Reserve Funds.—The Board of Governors shall not, directly or indirectly, lend against, purchase, or guarantee any asset or obligation of any State government, municipal government, local government, or county government or to otherwise assist such governments, in any instance in which the State government, municipal government, local government, or county government has defaulted on its obligations, is at risk of defaulting, or is likely to default, absent such assistance from the United States Government. Notwithstanding any other provision of law, no Federal funds may be used to pay the obligations of any State, or to issue a line of credit to any State.

See: 16 reasons that California is the next Greece >

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