The Federal gov't won't ever let California outright default on its debt. Why? It is the largest economy inside the US, it serves critical national security purposes, and being the biggest state debtor it will take dozens of other broke states down with it. A default would trigger a copycat landslide in the dozen other states who are also crippled with massive debt. If half the states default, all the dike holes the Fed has been filling with fingers over the past 2 years will have been for nought. It just can't be allowed to happen, period. At least in plain sight.

It's exactly like how the banks are keeping their 1+ years worth of "shadow" housing inventory off the market, so as to keep a floor on prices and prevent everyone from panicking and running for the exits at once.

And just like how the Federal bailouts were passed through back channels(i.e. Maiden Lane I & II, reserve swaps with foreign central banks, etc), and arcane accounting tricks that no congress-critter can comprehend, and the biggest political smoke & mirrors America has ever seen, so too will it go for the bailing out involvent states. It won't be Obama handing Schwarzenegger an oversized $30 billion dollar check on TV like a grinning Ed McMahon. No, it'll be a thousand tiny accounting tricks to prop up California, and keep the markets in perpetual doubt about the overall fiscal status of California.

Our entire Federal fiscal and monetary policy is a waiting game. They don't know what will happen, but the thinking is if we can all just hang on long enough for everyone to adjust to the economic new normal, then we can at least avoid an outright national collapse. Nobody on the planet can even know if this will work, but there are zero alternatives.