* Shruti Singh and Amanda Albright at Bloomberg…
Illinois, which has faced escalating penalties in the bond market as the coronavirus batters its finances, is poised to become the first state to borrow from the Federal Reserve’s $500 billion lifeline for local governments.
The state is planning to borrow $1.2 billion from the central bank for one-year to cope with revenue losses brought on by the economic shutdowns caused by the pandemic and the delay of its annual tax-filing deadline.
The step comes after Illinois last month canceled a planned auction of such short-term debt as the interest rates demanded by investors soared amid concern it could be the first state to have its bonds cut to junk. The Fed will charge an interest rate of 3.82%, more than a full percentage point less than it paid during a bond sale last month.
“The Federal Reserve Bank worked closely with our team to make this transaction possible through the Municipal Liquidity Facility, which is an important tool the state is using to answer the unprecedented economic challenges posed by the COVID-19 pandemic,” Alexis Sturm, director of the Governor’s Office of Management and Budget, said in the statement.
The bond is scheduled to be paid off a year from Friday. A bill passed last month allows the state to borrow another $5 billion, but that would likely be long-term.
- Donnie Elgin - Tuesday, Jun 2, 20 @ 6:13 pm:
Borrower of last resort
- Blue Dog Dem - Tuesday, Jun 2, 20 @ 6:27 pm:
I kinda thought Illinois could stall til the next General election and see what happens regarding loan forgiveness. ImO recent events will assure another 4 years of Trump.
- 44th - Tuesday, Jun 2, 20 @ 6:37 pm:
good luck collecting FEDs.
- dbk - Tuesday, Jun 2, 20 @ 8:15 pm:
Wasn’t it the initial idea that Illinois would borrow x-amount and then pay off the loan with federal aid funding (assuming it was forthcoming)?
What other options did the Governor have at this point, realistically?
- Da Big Bad Wolf - Wednesday, Jun 3, 20 @ 5:02 am:
=== good luck collecting FEDs.===
When did Illinois ever welsh on a loan, ever?
- Old School - Wednesday, Jun 3, 20 @ 7:35 am:
Chicago and the State of Illinois are both in financial ruins due to years of mismanagement. They both inherited a mess. But they both have made matters worse. It’s like they both want to take the city and state to the brink in order to reshape them to their model. As Rahm Emmanuel said never let a crisis go to waste. As new politicians they both went nuclear right off the bat. And they both have a common personality trait of an overinflated ego. Rules are for the common man but not for me. When I look at every decision the governor makes I look at it with the understanding everything he does is to impediment a graduated income tax. I picture him in a toga - Nero fiddles as Rome burns.
- Oswego Willy - Wednesday, Jun 3, 20 @ 7:43 am:
=== It’s like they both want to take the city and state to the brink in order to reshape them to their model. As Rahm Emmanuel said never let a crisis go to waste.===
(Sigh)
So they “created” the virus and the protests, the responses to those, and the aftermath of both… because Rahm Emmanuel?
C’mon. That means Dr. Fauci is complicit, with the stay at home, and the President is complicit by enflaming protests to higher intensity too.
This is victimhood at its finest;
=== When I look at every decision the governor makes I look at it with the understanding everything he does is to impediment a graduated income tax.===
No.
What is happening is that these crisis only exacerbate and highlight the “haves and have nots”, and if that makes you think these choices (a once in a century pandemic, the responses les by Dr. Fauci’s recommendations, and protests not seen since 1968, but doubled in sheer intensity by no calming by POTUS) are politics to… cynicism… that’s “baloney”.
I’m sure you see this seriously, right?
=== I picture him in a toga - Nero fiddles as Rome burns===
Nope. Cartoon imagery.
- NorthsideNoMore - Wednesday, Jun 3, 20 @ 7:54 am:
The once great state of IL was a spend, spend, spend, tax and now borrow borrow ad nauseum. Borrowing by definition is the use of something with the intention of paying it back, so whats the plan? Hope that the economy recovers ? The can has been squarely kicked down the road(again). Nothing to see here folks move along
- Da Big Bad Wolf - Wednesday, Jun 3, 20 @ 8:02 am:
=== Hope that the economy recovers ? ===
Why wouldn’t the economy recover? There have been depressions before.
- Oswego Willy - Wednesday, Jun 3, 20 @ 8:14 am:
=== Borrowing by definition is the use of something with the intention of paying it back, so whats the plan?===
* Read Illinois’ constitution
* When has Illinois defaulted on loans described by the constitution
Here’s where I miss -Wordslinger -
He suffered no fools and his understanding to this and the rating racket…
Then I just miss - Wordslinger -, period.
- Say His Name - Wednesday, Jun 3, 20 @ 8:34 am:
Dear Willy,
You don’t have to fully or even partially agree with folks, but at least take a moment to hear them out.
- Oswego Willy - Wednesday, Jun 3, 20 @ 8:45 am:
Dear - Say His Name -,
Hearing out misguided misinformation wrapped in a rant is not constructive.
I do hear them out.
Responding *is* hearing.
With respect.
OW
- Blue Dog Dem - Wednesday, Jun 3, 20 @ 9:04 am:
just remember that Illinois pension funds benefit from the ratings racket as well. Guaranteed pension returns calculate a nearly 7% rate of return. Fixed pensions. A failure.
- Back to the Future - Wednesday, Jun 3, 20 @ 9:18 am:
Actually sounds like a very reasonable and fair deal for the Federal Reserve and Springfield. The Feds are pretty good at providing liquidity and making money on a deal like this. Worse case scenario for the Fed is selling a Treasury Bond out a couple of years with a yield of .17% and loaning those funds to Team Pritzker at 3.82%. Most of us would do a deal like that all day long.
In terms of Team Pritzker they get money for far less than the Bond deal they constructed for their last offering.
Taxpayers might not be excited about the deal, but in times like this governments always borrow. This deal makes a lot more sense than having Team Pritzker doing another unusual Bond deal.