Recipe for Disaster: Follow-Up -- Not A Bakken Story

Just last month, November 26, 2012, to be exact, I posted a "recipe for disaster."

It didn't take long for the mainstream media to pick up on this story.

NPR is reporting that a California school district owes $1 billion on a $100 million loan. And that's not even the worse one.

Perhaps the best example of the CAB issue is suburban San Diego's Poway Unified School District, which borrowed a little more than $100 million. But "debt service will be almost $1 billion," Lockyer says. "So, over nine times amount of the borrowing. There are worse ones, but that's pretty bad."

There are worse cases. OMG.

Cue up Connie Stevens.

I wonder if it would be too soon to add San Diego to the list of US cities in financial trouble from which it is unlikely they will be able to recover without a) a bailbout; b) managed bankruptcy; and/or c) chaotic bankruptcy.

Or change the rules:

Back in the '90s, the state of Michigan banned capital appreciation bonds altogether. But Lockyer says California needn't go that far. He supports a series of reforms such as capping the payback of debt to four times the amount borrowed. Otherwise, says Lockyer, these bonds will be paid well into the future, by the children of today's students.

Even Michigan, over twenty years ago, was able to figure this was a "recipe for disaster."