California Debt Near Junk Bond Status

The California disaster which has been years in the making took another turn for the worse today as Moody's credit rating downgraded the state to new junk bond status. Last week the Fitch agency had first lowered the states ratings, and now Moody's. Soon and enough S and creditswill downgrade as well leaving a state with 1/8th of the US economy the fiscal disaster.

SAN FRANCISCO (Reuters) - Moody's cut its rating on Tuesday on about $72 billion of California's debt to near junk status, citing the state's budget crisis, but a top lawmaker said a deal to close a $26.3 billion gap was near.

Moody's Investors Service in a statement said it cut the state's general obligation debt by two notches to Baa1, or three notches above speculative "junk" status and the rating may suffer further downgrades because of a growing risk to the state's ability to make priority payments.

They include payments to investors holding the state's debt.Spokesmen for the state treasurer and state controller quickly countered Moody's, noting priority payments would be honored while Republican Governor Arnold Schwarzenegger and leaders of the state's Democrat-led legislature press on with talks to balance the state's books.

"We've never defaulted. We've never failed to pay bond investors on time and in full. We'll maintain that spotless record," said Tom Dresslar, a spokesman for State Treasurer Bill Lockyer.

Its not like this came out of left field, this crisis has been coming to a boil and all we have gotten is dithering and foolishness from the state government.
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