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Cantor says, No Bankruptcy Option for States!

By Joseph McDaniel, Esq.

I think it's a case of slamming the door after the horse has galloped away.

We had a system that rewarded banks and mortgage companies for making lousy loans; similar economic profit incentives made credit card companies a little sloppy.

And they knew exactly what was coming, because billion-dollar banks ain't stupid.

And the banks were forced to keep making crummy loans, because the money it was so good. 

So after they encouraged crazy borrowing with every ploy known to mankind since Eve sold apples to Adam, the banks then went to Congress and bought the 2005 Amendments to the Bankruptcy Code with massive campaign contributions, for about one long decade. Laws cost a lot, these days. Even on the installment plan, don't you know.

And now somebody named Cantor says that States should not be permitted to file bankruptcy, and the States won't get bailed out. 

Note: since politicians can spend money faster than anybody could possibly bail them out, it's probably a good idea not to bail out individual States. That would just encourage them to spend more. And then a little more. With some, you know, more sauce.

Mind you, it would be possible to bail out the States one way, by simply printing more money. As though it was just paper. And in that scenario, money becomes simply pieces of paper. And that would tick off the people who were receiving retirement benefits just as much, when $2,000 a month bought them a cup of coffee at Starbucks.

So let's not bail out States, and maybe not let 'em file bankruptcy.

Which leaves door number three: some politician needs to grow a pair and say "We promised too much, because we wanted to buy your votes. And now we can't deliver, because we made insane promises. So you won't get your jewel-encrusted pony, or your retirement payments. Sorry!"

And the Truth shall set them free.

Full post as published by Arizona Bankruptcy Attorney Blog on January 25, 2011 (boomark / email).