From The San Fransisco Chronicle….

Cutting the pay of about 200,000 state workers to the federal minimum wage of $6.55 an hour would save California as much as $1.2 billion a month, the governor’s office said. Such workers would get regular pay plus back pay once a new budget is approved.

The layoffs of nearly 22,000 temporary, seasonal and student workers would save the state as much as $28.5 million a month, the governor’s office added. It is not clear whether workers laid off would be rehired when a new budget is enacted.

Slashing state worker pay will likely face a legal challenge from state Controller John Chiang, who has the responsibility to disburse pay checks, saying he will not go along with the governor.

From the Detroit Free Press….

Backers of a program that would lend up to $25 billion to automakers and auto parts suppliers said today they had garnered 71 U.S. House members to support their search for $3.75 billion in funding over the next couple of months.

There only looking for $3.75 billion because that is all they think it will cost the government to borrow $25 billion and loan it to the auto makers. Apparently they expect it to be repaid. But read this from Reuters…..

General Motors Corp will need to raise as much as $15 billion in cash to shore up liquidity and bankruptcy is “not impossible” if the U.S. auto market continues to slump, Merrill Lynch said.

And that is just GM. The other car manufactures are in even worse shape. Very little chance of seeing the money repaid. And in related news….

The White House predicted on Monday that the Bush administration would bequeath a record deficit of $482 billion to the next president — a sobering turnabout in the nation’s fiscal condition from 2001 when President Bush took office and inherited three consecutive years of budget surpluses.

And this is including all the “extra” money from social security.

Given the scale of the federal budget, 25 billion is pocket change. But we are running out of pocket change.

From Naked Capitalism…..

We will return to discuss the implications of how big the debt level is, but the graph itself should serve to focus the mind. The March 31 level was 350% of GDP. The previous peak occurred in 1933, during the Great Depression, at just under 270% of GDP. Note that the peak was reached due to the start of the rapid fall in GDP taking hold faster than debts were written off, a dynamic not in operation now. So the comparable level to our situation is in fact lower than the 270% peak.

An additional bit of cheery news comes from reader Bjomar: Japan’s total debt to GDP in 1990 was roughly 250% (it took some triangulating among this, this, and this source, his interpolation of corporate debt at 100-140% of GDP, household at 65%, and government at 60%). And unlike us, Japan had a very high saving rate, so its net debt would have been less alarming.

Look at the Graph.

Chrysler and Boscov’s are on the ropes.

A quick glance at this map shows that states in flyover country generally manage their money better than sophisticated states. The better its reputation for high culture, the more likely it is running a big deficit. (h/t Naked Capitalism)

Calculated Risk on M&T’s conference call….

M&T is the first of the top 20 largest banks to report quarterly results, and the news is bad.

It use to be the stock market would go up even when bad news was announced. Now we have have a bank run on a bank that has already been taken over by the FDIC. Can someone explain that to me?

I mean, are people really so ignorant that they don’t realize that the damage has been done once the government has taken over? If their accounts are under 100 grand they have nothing to worry about. If their accounts are over 100 grand it is to late to do anything about it.

It would seem more rational for their to be a run on banks that have not been taken over yet.

Edit: I just found this story from Reuters…..

At a branch at IndyMac’s headquarters, customers began arriving at 4 a.m., five hours before the doors opened. The Federal Deposit Insurance Corp now operates the thrift’s 33 Southern California branches.

“I didn’t think anything like this would happen,” said retired teacher Charles Tengeri from Pasadena, who was first to emerge from the branch after withdrawing $171,000 — about two-thirds of his life savings. “I withdrew as much as I could. I know it’s going to take a little time.”
The FDIC said the renamed IndyMac Federal Bank will cover insured deposits, mostly up to $100,000, and initially cover 50 percent of uninsured deposits.

“I have $360,000 in this bank, and I was misled by this bank,” said Robert Clark, a Glendale resident. “I gave the names of my mother, my sister and my brother on the account so I thought I would be insured. I don’t know what to do. I really don’t know what to do.”

The guy who came out with $171,000 must have had a joint account. Otherwise he would have only got $100,000 out. And if you had $360,000 why would you try to game the system by giving the names of every relative under the sun so that you could keep all your money in just one account? Why not just open up an account somewhere else?

I think the guy knew that Indymac was in trouble but wanted to take advantage of high interest rates they were offering. You play with fire, you get burnt.

Okay, so that the tittle of this post does not take into account inflation. Still, Indy Mac was not as small as most banks that have failed recently.

From Sacramento Real Estate Statistics (a blog)….

Indymac Bank officially failed a few minutes ago. The FDIC has taken it over, and will begin liquidating assets on Monday. The failure will cost the FDIC trust fund between $4 and $8 Billion. Sadly, it looks like many depositors will lose a lot of money as well.

I don’t believe that the FDIC will only lose between $4 and $8 billion on this deal. More like 10 to 16 billion. For one thing, I think they are going to keep Indymac a float for to long in hopes of finding a buyer.

Naked Capitalism has a good overview of how this will affect FDIC.

More details from Credit Bubble Stocks.

New nuclear plants are being built in…..

China

Turkey

Russia

Japan

Switzerland

United States

Great Britain

And that is just the most prominent ones.

Many of these are being built in countries that are famous for their sloppy building processes and corrupt building inspectors. For that matter, with so many being built at once I wonder how even the the rich countries going to find competent builders for all of them. Not just anyone can build a nuclear plant. It is also going to be trick to find competent people to run all of them. If I was terrorist or had inclinations that way I would be brushing up my resume right now.

And last I knew, people still had not agreed on a place to store the resulting waste. Did something change while I was not looking?