The State of Massachusetts, looking to borrow money to make a local aid payment, found itself unable to borrow sufficient funds on the open market to do so, forcing the Treasurer to utilize State funds to make up the balance of the payment. From the Boston Globe:
In an example of how fragile credit markets have become, the state of Massachusetts yesterday tried to borrow $400 million to make its routine quarterly local aid payments to cities and towns. State treasury officials said the credit markets abruptly froze midday, leaving them $170 million short. The state will have to use its own funds to complete the local aid payments, draining the state’s balance to extremely low levels.
This remains the real threat to the economy, and while bailing out private institutions that made bad bets is anathema to just about everyone, there is more at stake here than the financial health of Wall Street. Real people are going to get hurt, and real jobs lost unless the credit markets are stabilized. The policy decisions will be imprecise, but we cannot let the perfect be the enemy of the overall good.
Read the Globe story here.