Here is a strange thought. Considering that fiduciaries like Indiana are probably avoiding securities who are taking bailout money, is a federal guarantee of California debt a good thing or a bad thing for investors? If you are willing to view California as in the preliminary stages of bankruptcy like GM and Chrysler, you have to ask yourself if I buy some California debt will they treat me any better than they treated the Chrysler debtors? If your answer is no then it may be possible that a federal guarantee will require an even higher interest rate to overcome the increased risk that a federal intervention will leave you with a large loss. I suppose that fiduciaries outside of California are not very keen on California debt to begin with and the aspect of a potential loss from federal intervention in a bankruptcy proceeding probably make those securities really unappealing. It will be a very strange world if the only buyers for California debt is the US Treasury and CALPERS.