2) California will lead the parade of states in trouble.  They want the US to guarantee their municipal debt.  Schwartzenegger did all he could to try to pass the referenda that might partially close the budget gap, but from what I see now, it looks like most of the important ones have failed.  Having been a California resident for seven years, I went though my share of referenda; the referendum process makes the politicians of California lazy… they pass the tough stuff off to the electorate, who then get to decide off of voters’ guides and soundbites.

3) California is an exaggerated version of the troubles that other states are having.  Social program spending rises, while taxes on wages, corporate profits, real estate, real estate transfers, etc., all fall.  If you can’t print your own money, and must balance your budget, life is tough, kind of like it is for most Americans.

4) Another municipal issue — can financial guarantors split in two?  I have argued “no,” but who cares what I think?  We do care about those that use the courts, and banks are suing to prevent the MBIA split.  It is a simple issue of fraudulent conveyance.

5) One last municipal issue: pension placement agents.  This is very similar to what I experienced in Pennsylvania regarding municipal pensions there.  Pension consultants would gain business through campaign contributions, and the Democratic and Republican consultants would collaborate and share to control the profits jointly.  Insurance companies providing pension services would pay  compensation to the consultants in exchange for business.  It’s a dirty business, and when I raised ethical objections to it, I was told that I was naive.  Perhaps I have more company now.

Anytime you have opaqueness of compensation, politics, and uncertainty of results (investing), there is always room for corruption.