Obama administration officials expressed concerns Thursday about California’s request for federal intervention in its budget crisis as the state’s congressional delegation split on the issue.
More Top Picks Best Kids Mountain Bikes
California has asked the administration to provide guarantees for billions of dollars in emergency loans, saying the state will soon run out of cash without federal help.
But Treasury Secretary Timothy Geithner expressed doubt Thursday that he had the authority, without new legislation, to help the state under the program Congress set up to rescue financial institutions.
He told a congressional committee that the primary burden rests with governors and mayors to bring their deficits down. But he added that in order to turn around the economy, “there are things that we’ve had to do I would never have contemplated doing.”
Geithner pledged to work with Congress to explore ways to help California. But some congressional Republicans opposed any federal role, posing a political challenge to the Obama administration should it decide to step in.
In an interview Thursday, David Axelrod, a senior adviser to President Barack Obama, voiced concerns that if the federal government provides special assistance to California, it could open the door to other struggling states wanting federal aid.
“Look, we’re going to examine what we can do,” Axelrod said. “What we need to do, however, is to treat states fairly, and that means uniformly. Whatever we do for one state, there will be other states who also will want to do that. And there’s a limit to what the government can do.”
A Federal Reserve official said Thursday that the central bank is reluctant to help guarantee loans to California or municipalities.
“We’re quite concerned about the potential political implication for us being interposed in these situations,” said David Wilcox, deputy director of the Fed’s research and statistics division.
Geithner was barely in his seat at another congressional hearing on an unrelated subject when Rep. John Culberson (R-Texas) asked, “Mr. Secretary, will you categorically rule out bailing out California or any other states with our tax dollars?”
Geithner made no commitment.
California’s delegation of 52 sitting members is largest in the House. But the delegation is fractured, mainly along party lines, over federal intervention in California’s budget crisis. The delegation includes a number of Republicans who dislike California Gov. Arnold Schwarzenegger, a Republican, and do not believe Washington should bail out the state for its failures.
Rep. Jerry Lewis (R-Calif.) said it is “hard for me to quite imagine my colleague from Wisconsin or one of my friends from Kansas” supporting federal intervention in California’s budget crisis.
But Rep. Bob Filner (D-Calif.) said it “sounds like a good idea. We’re providing loan guarantees to everybody else.”
———–
Jim Puzzanghera of the Washington Bureau contributed.