INNOCENT BY-STANDERS

The credit crunch, caused by greed, is beginning to affect more people who had nothing to do with it, in this case, state & local governments and other institutions who used bonds for various projects.

Auction-Bond Failures Roil Munis, Pushing Rates Up (Update5)
By Martin Z. Braun

Feb. 13 (Bloomberg) -- Bonds sold by U.S. municipal borrowers with rates set through periodic auctions failed to attract enough buyers as banks including Goldman Sachs Group Inc. and Citigroup Inc. that run the bidding won't commit their own capital to the debt.
Rates on $100 million of bonds sold by the Port Authority of New York and New Jersey, with bidding run by Goldman, soared to 20 percent yesterday from 4.3 percent a week ago

The auction failures provide new indication of Wall Street's unwillingness to commit capital amid $133 billion in credit losses and asset writedowns.

Local governments that have borrowed in the $300 billion auction-rate market confront the prospect of higher borrowing costs as economic slowing trims tax revenue.

Arizona is one of the states facing a budget gap because of what is essentially a state-wide recession. Here's one of the steps proposed for dealing with the crisis:

House panel to state: Stop hiring now
Gov't and university freeze aimed at ballooning deficit
By Howard Fischer
Capitol Media Services
Tucson, Arizona Published: 02.14.2008

PHOENIX — The House Appropriations Committee voted Wednesday to freeze virtually all state government and university hiring and promotions indefinitely in an effort to stanch the flow of red ink.

The vote to cut spending is designed to deal with a deficit that even gubernatorial aides are admitting now appears to exceed $1 billion in this year's $10.6 billion state budget. And the gap could hit $2 billion next fiscal year if spending continues at current levels.