Posted on 07/06/2009 6:32:02 AM PDT by raybbr
Amid the vacation rentals and used cars for sale, browsers of the website Craigslist will now find a unique offer: for California IOUs.
If you are receiving a California IOU and you need cash immediately, please contact me. I may be of assistance, reads one posting.
Wall Street, quick to spot an opportunity, is also gearing up to trade the payment promises.
We have a whole team working on it, said Barry Silbert, chief executive of SecondMarket, a company that trades illiquid assets such as bankruptcy claims, private company stock and toxic assets.
Mr Silbert said hedge funds, municipal bond investors and other institutions were interested. Trading volume will depend on how many IOUs the state issues and how long banks accept IOUs for deposit at face value.
A stalemate over how to close a $24bn (£14.7 bn) budget gap has left California short of cash. The state last week issued $53m of registered warrants, or old-fashioned IOUs. If the budget impasse persists, it could issue more than $3bn IOUs by the end of July for payments such as tax refunds, welfare and vendor bills.
(Excerpt) Read more at ft.com ...
“As long as govt. gets a cut will they do anything about this? “
No. Obama is in bed with Goldman Sachs.
What a great racket. The state steps in and issues IOU’s for services rendered to entities with no say in the matter other than to cut off future services. Then the speculators swoop in and will offer these entities pennies on the dollar for the IOU’s which cash strapped entities will be forced to consider. It would behove all California business entities to CUT OFF California from any and all services for the time being.
But no IOU’s to pay state legislators and other government employees, of course. That’s for tax refunds and stuff.
They will be trading them and they will still have a “full faith and credit” unspoken guarantee from TRAPland on the Potomac.
Are the banks that are accepting these also taking TARP money? If they are, then Pelosi and company have just stuck their hands in all of our pockets to bankroll Sacremento’ malfeasance.
Sounds like one of theose Payday Loan scams. They’ll probably give desparate IOU holders 50-70% on their dollar.
And if Goldman Sachs or some other "connected" entity is the buyer, then those IOUs will be CERTAIN to be redeemed for 100%. Federal aid will be made conditional upon that (officially or discretely)
Then, California taxes the sale of the IOU
“It would behove all California business entities to CUT OFF California from any and all services for the time being.”
A decade ago one of our younger relatives in Californicator land was stolen by a competitor to the firm he worked with.
One of his requirements besides pay and certain personal benefits was to not to bid on any State or county deals.
He was promoted to VP last year for that decision and a few other reasons.
So, technically California can also offer to buy back IOUs for pennies on the dollar...either through third parties or proxies. They are thus relieved of their debt at a huge discount...at the expense of those expecting a state tax refund.
Other states will catch on to this scam quick...New York is next.
Folks...make sure you underwithhold your state taxes.
Let the free market work.
Couldn't those who are receiving the IOUs refuse them? They're not legal tender, right? But I imagine once you accept them, you are opening yourself to the claim by the state that they satisfied their debt, whether you get full face value or get $0.10 on the dollar.
Ah, Kalifornia. The United States WITHOUT a printing press.
This is a good thing. They are creating liquidity and allowing people to trade those IOUs freely.
You cannot get more anti-government than that.
LOL!
“I think I would rather invest in highly leveraged Confederate dollar futures contracts”
ROTFLMAO!
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