Posted by Tim · 4 Comments
The state was kind enough to send me a booklet discussing the propositions on the ballot for the next election. While friends of mine take issue with props 4 and 8, what caught my eye was the fiscal impact of CA Prop 12. It’s a proposition to take out a $900 million bond to help veterans buy homes and farms, which I guess means there’s some truth to the cliché about hardened vets wanting to live on a farm after this war ends.
But I digress. The bond itself is $900 million. The interest paid back on the bond — i.e. the money that goes straight to the lenders, not the veterans, not the state, nor the public, is $856 million.
The interest paid on the bond is 95% of the amount borrowed.
When borrowing money costs nearly as much as the amount being borrowed, there seems to be something fundamentally wrong. Especially since if the state is going to have to raise $856 million on its own, why does it need the bond in the first place?
Hey, a lot of banks are failing. When they make 95% profit on the money lent out, while my “high yield” savings account is in the neighborhood of 3.4%, I really wonder how they managed to fuck up a 91% profit margin?