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Big Banks Don't Want California's Ious

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http://online.wsj.com/article/SB124692354575702881.html

A group of the biggest U.S. banks said they would stop accepting California's IOUs on Friday, adding pressure on the state to close its $26.3 billion annual budget gap.

The development is the latest twist in California's struggle to deal with the effects of the recession. After state leaders failed to agree on budget solutions last week, California began issuing IOUs -- or "individual registered warrants" -- to hundreds of thousands of creditors. State Controller John Chiang said that without IOUs, California would run out of cash by July's end.

But now, if California continues to issue the IOUs, creditors will be forced to hold on to them until they mature on Oct. 2, or find other banks to honor them. When the IOUs mature, holders will be paid back directly by the state at an annual 3.75% interest rate. Some banks might also work with creditors to come up with an interim solution, such as extending them a line of credit, said Beth Mills, a California Bankers Association spokeswoman.

Meanwhile, on Monday morning, a budget meeting between Gov. Arnold Schwarzenegger and legislative leaders failed to produce a result. Amid the budget deadlock, Fitch Ratings on Monday dropped California's bond rating to BBB, down from A minus, the latest in a series of ratings downgrades for the state.

The group of banks included Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and J.P. Morgan Chase & Co., among others. The banks had previously committed to accepting state IOUs as payment. California plans to issue more than $3 billion of IOUs in July.

Ms. Mills of the CBA said some banks were concerned that there aren't processes in place to accept IOUs, and also worried about fraud issues. She noted that not all banks have set a July 10 deadline, and that dozens of credit unions in the state will keep accepting IOUs.

Wells Fargo's head of community banking, Lisa Stevens, said: "We're very disappointed, as are many Californians, that California has taken the unfortunate step of issuing IOUs in lieu of payments to some businesses and individuals."

State officials said they were disappointed by the banks' decision. Garin Casaleggio, a spokesman for Mr. Chiang, said: "We don't want anybody to suffer who can't redeem them when they need cash."

Spectacularly cheeky from the fraudsters with vaults full of ****** all.

I'm amused.

This is worth watchng from a reaction/legislation PoV because it's likely we will see the same situation here shortly.

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This seems the big story of the day. It doesn't make much sense to me if California cannot pay its bills today.. its a collosal deficit today, how in October it is going to not only make up the deficit in October but pay for the previous month's deficits as well.

I don't think most people understand the scale of the meltdown in California. House prices down 50% in 2 years. In an economy that was based on perpetual growth in housing, construction, retail malls, commercial real estate etc.. It was a giant ponzi scheme. Which investors from around the world got brutally burned on, but now for the Californians all that ponzi money isn't coming in anymore.

As it unwinds it causes cascading job loss.

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They don't want to accept California's IOUs yet we are supposed to accept theirs...... and what's more we are going into massive amounts of debt in order to give money to them to encourage them to write more IOUs.

Wonderful.

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California should just print special pieces of paper that are worth something apparently..........money. :unsure:

It's laughable that a bank won't accept peoples IOU notes, but we've got to accept theirs. A strange a world and no mistake. :blink:

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California should just print special pieces of paper that are worth something apparently..........money. :unsure:

It's laughable that a bank won't accept peoples IOU notes, but we've got to accept theirs. A strange a world and no mistake. :blink:

The value is in the scarcity and the general acceptance. Youll accept anything if you think someone lse will accept it off you. Porn mags, cigarettes, shells, pictures of arnie wearning a crown blah blah

Edited by Alan B'Stard MP

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The value is in the scarcity and the general acceptance. Youll accept anything if you think someone lse will accept it off you. Porn mags, cigarettes, shells, pictures of arnie wearning a crown blah blah

The trouble is, paper's not scarce, neither is ink. Gereral acceptance to me is brainwashing by the banks that their pieces of paper are the only valuable ones. It's all a bit mad if you ask me. :rolleyes:

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The trouble is, paper's not scarce, neither is ink. Gereral acceptance to me is brainwashing by the banks that their pieces of paper are the only valuable ones. It's all a bit mad if you ask me. :rolleyes:

Brainwashing: irrelevant.

Nature is as nature does. If its accepted - it's accepted.

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The value is in the scarcity and the general acceptance. Youll accept anything if you think someone lse will accept it off you. Porn mags, cigarettes, shells, pictures of arnie wearning a crown blah blah

Err no.

You accept things because you want them for themselves.

Especially when you are say - a realy rich banker who doesn't have to take stuff of others if he doesn't want to. for the rich free market rules always apply.

;)

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Brainwashing: irrelevant.

Nature is as nature does. If its accepted - it's accepted.

And fiat money is never accepted!

The clue is in the name.

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Err no.

You accept things because you want them for themselves.

No. The only reason I accept paper with pictures of davy crocket on it is because I think others will accept it.

Sorry but wishful thinking doesn't change the facts.

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not all banks have set a July 10 deadline, and that dozens of credit unions in the state will keep accepting IOUs.

California will push ahead.

As I understand it, most of the IOUs to date have been issued in respect of tax rebates, which the state can no longer pay immediately from declining revenues.

This idea could catch on with some other Governments I think.

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California should just print special pieces of paper that are worth something apparently..........money. :unsure:

It's laughable that a bank won't accept peoples IOU notes, but we've got to accept theirs. A strange a world and no mistake. :blink:

I watched a talk by T. Geitner the other week at some law/banking college.

Student question about re-financing/ getting loans to keep small business afloat etc

Laughable reply line was -

"WE should all tighten our belts in the recession"

This is after those throughout the Financial Business World have been filling their pockets with Billions whilst feeding in a ponzi-frenzy, looting pension schemes etc like the pack of sharks they are!

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No. The only reason I accept paper with pictures of davy crocket on it is because I think others will accept it.

Sorry but wishful thinking doesn't change the facts.

So you accept it because you want it.

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California will push ahead.

As I understand it, most of the IOUs to date have been issued in respect of tax rebates, which the state can no longer pay immediately from declining revenues.

This idea could catch on with some other Governments I think.

Well its July so time for my self assesment return.

I better get started with designing some fancy IOUs. I'm thinking Ron Jeremy for the face and a Beaver on the back.

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So you accept it because you want it.

No I accept it because I believe others will accept it. Just like a ticket tout who accumulates tickets of julio iglesias

- not because he wants to watcth the spanish crooner himself but because he knows theres plenty of grandmas who do.

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So you accept it because you want it.

gimme gimme gimme

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No, it's a fraud pretending to be fiat. :)

fraud schwaud.

anyone can issue money - its a free market

casino chips

milk tokens

bus tokens

wh smith gift vouchers

injin dollars

cinema tickets

its all potential-money and its freely decided upon.

Edited by Alan B'Stard MP

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fraud schwaud.

anyone can issue money - its a free market

casino chips

milk tokens

bus tokens

wh smith gift vouchers

injin dollars

cinema tickets

its all money and its freely decided upon.

You try paying off a debt with injin dollars (or taxes) and see how far you get. :lol:

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You try paying off a debt with injin dollars (or taxes) and see how far you get. :lol:

Exactly. Youve hit the nail on the head. But why you think you can force your injin-dollars-credit-instrument on someone to pay your debts I dont know - regardless of the virtues of the debt.

Edited by Alan B'Stard MP

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