WASHINGTON — California needs to solve its financial crisis by itself and should not expect an emergency bailout from the White House, an array of Obama administration officials said Thursday, making clear they had no appetite to step in and provide financial assistance or loan guarantees.
"Look, we're going to examine what we can do. What we need to do, however, is to treat states fairly and that means uniformly," David Axelrod, senior advisor to the president, said in an interview. "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."
Axelrod indicated that federal intervention on California's behalf would set a dangerous precedent.
"There's no doubt that there are states all over this country who have problems -- not problems the size of California -- but significant problems. And every governor in the country wants and needs assistance," he said.
It is exceedingly rare for the federal government to help a state weather a short-term cash crisis such as the one California faces, administration officials said.
Even if the president were to make an exception for California, the aid would need to come on unattractive terms so as not to send a message that distressed states can expect Washington to engineer a painless rescue.
Although the $700-billion federal bailout fund potentially could be tapped to help California, Treasury Secretary Timothy Geithner expressed doubt Thursday that he had the authority, without new congressional legislation, to aid California under the program originally set up by Congress to rescue financial institutions.
The legislation creating the Troubled Asset Relief Program, or TARP, specifically restricted use of the money to financial institutions.
It also limited troubled assets to mortgages or mortgage-related securities "issued on or before March 14, 2008."
The Bush administration expanded the use of the bailout fund to provide loans to General Motors and Chrysler.
To get Congress to release the second half of the fund, Obama's top economic advisor, Lawrence Summers, promised in a Jan. 15 letter to Senate Majority Leader Harry Reid that the new administration would limit assistance to financial institutions and automakers. But the letter also said the president could enact new initiatives aimed at "forestalling a significant economic dislocation."
