Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

Big banks saying no to California IOUs (Creditors Want Cash, Not Promises)
HotAir ^ | July 7, 2009 | Ed Morrissey

Posted on 07/07/2009 11:15:08 AM PDT by GOPGuide

The financial sector has just delivered a message to California, roughly translated as, “Quit working on cow tails and apologies to long-dead people.” A group of the largest banks in the US has announced that it will stop accepting California IOUs by Friday. The state will run out of cash by the end of the month if it cannot issue IOUs, as long as its $24 billion budget gap remains unresolved:

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 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.

One of the reasons we use a common currency, provided by the federal government, is to avoid fraud issues. Several people have wondered at the legality of issuing IOUs as cash devices. They accuse California of creating currency, which is unconstitutional, although the state has done it on previous occasions.

Also, Californians may not understand this, but these IOUs are essentially state bonds. The people who buy them are demanding 3.75% interest APR on the devices, which means that the state is actually spending more money than they normally would now. The longer they use IOUs instead of cash, the more expensive it gets for Californians later when the IOUs get cashed.

Interestingly, all of the above banks have accepted TARP funding, or perhaps more accurately, had TARP funding thrust on them. Would the Treasury have to have approved this decision? Did the Treasury insist on this decision? If so, it could either signal a hardline approach from the White House on California’s budget crisis, or give them an excuse to intervene.

A bailout would only delay the day of reckoning. California’s budget woes are entirely of their own making, and a bailout would not solve the underlying political problems in California. They tax too much and they spend too much, and their political class hasn’t got the guts to actually solve either of those problems, let alone both. A bailout would put California right back in the same place next year, and the year after that. If ever there was a moment for tough love from Uncle Sam, this is it.


TOPICS: Front Page News; News/Current Events; Politics/Elections
KEYWORDS: arnold; california; credit; debt; iou; nothanks; rino
Navigation: use the links below to view more comments.
first 1-5051-52 next last

1 posted on 07/07/2009 11:15:08 AM PDT by GOPGuide
[ Post Reply | Private Reply | View Replies]

To: GOPGuide

The funny thing is that with the size of the Kalif economy they could balance the budget with a few percent across the board cut to every department. They act like they’re having their fingernails pulled out. Most of us have already had to economize more than the Kalif govt would have to face


2 posted on 07/07/2009 11:20:47 AM PDT by Seruzawa (Obamalama lied, the republic died.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: GOPGuide

Obama may force the TARPed banks to accept them.


3 posted on 07/07/2009 11:21:29 AM PDT by St. Louis Conservative
[ Post Reply | Private Reply | To 1 | View Replies]

To: GOPGuide

Here comes the Federal bailout.


4 posted on 07/07/2009 11:25:13 AM PDT by Wolfie
[ Post Reply | Private Reply | To 1 | View Replies]

To: Seruzawa

I think that California COULD handle this problem, but I think that California WON’T handle this problem. And this may be how the SHTF. And if Obama steps in and tries to force banks to accept financial instruments that they do not want, then it will only make things worse.


5 posted on 07/07/2009 11:25:37 AM PDT by ClearCase_guy (I don't believe anything anyone says about anything anymore.)
[ Post Reply | Private Reply | To 2 | View Replies]

To: GOPGuide

6 posted on 07/07/2009 11:25:48 AM PDT by cranked
[ Post Reply | Private Reply | To 1 | View Replies]

To: St. Louis Conservative
Obama may force the TARPed banks to accept them.

He made me do it Mom.....Obamageddon...is beginning...

7 posted on 07/07/2009 11:26:55 AM PDT by cbkaty (I may not always post...but I am always here......)
[ Post Reply | Private Reply | To 3 | View Replies]

To: Seruzawa

Actually if we just followed our own laws and denied state services to illegal aliens, the deficit would shrink significantly on that savings alone.

Combine that with lifting the ban on oil drilling in the state and collect fees and taxes from the producers, and we’d be in surplus.

But I’m afraid all of that makes too much sense. Better to just go bankrupt, screw the taxpayers some more, or beg Uncle Sam for a bailout.


8 posted on 07/07/2009 11:28:42 AM PDT by Argus (We've gone downtown to Clown Town, and that's where we'll be living from now on..)
[ Post Reply | Private Reply | To 2 | View Replies]

To: GOPGuide

The Democrats in the legislature are hell-bent on raising taxes even more. The Assembly Speaker, Karen Bass, boycotted yesterday’s budget meeting, so the message to those who really want to balance the budget is, “Drop dead!”


9 posted on 07/07/2009 11:28:58 AM PDT by Deo volente
[ Post Reply | Private Reply | To 1 | View Replies]

To: GOPGuide

10 posted on 07/07/2009 11:33:14 AM PDT by razorback-bert (We used to call them astronomical numbers. Now we should call them economical numbers.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: GOPGuide
This is probably good news. This is what 40 years or more of electing Democratic Legislatures will do for you. They will put you into the poor house.

This is what will happen to the US if Obama and the Democratic Congress are not stopped.

The California Con Job is over. Free this, free that. Let in half the third world and their kids. Although immigration IS a Federal Responsibility. The Democratic Representatives and Senators from California have been fully in support of illegal immigration so part of it is California's fault. Well it's come to an end.

Now Californians, being the wonderful folk they are will try to get the citizens of the other 49 states to pay for their extravagance. This is what New York City tried back in the 1970's. It won't work this time. People are struggling everywhere and they don't have any patience for California's irresponsibility.

One thing is for sure. Schwarzenegger has been exposed as a dismal failure. Yes it's not all his fault but he didn't do the things he should have in 2004 that would have averted this disaster.
11 posted on 07/07/2009 11:36:52 AM PDT by truthguy (Good intentions are not enough!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: ClearCase_guy

Bump that, guy.


12 posted on 07/07/2009 11:41:17 AM PDT by Miss Behave (OMG, my tagline is stalking me.)
[ Post Reply | Private Reply | To 5 | View Replies]

To: GOPGuide

“Pass the popcorn, this is gonna git good.”


13 posted on 07/07/2009 11:42:51 AM PDT by free from tyranny
[ Post Reply | Private Reply | To 1 | View Replies]

To: truthguy

The stupidness of Kalifornia wouldn’t even keep the cost of today’s LA Circus down. They are now asking for donations to pay for the huge ADDED debt of the massive one-day STAR-STUDDED Jacksonfest.


14 posted on 07/07/2009 11:46:36 AM PDT by Miss Behave (OMG, my tagline is stalking me.)
[ Post Reply | Private Reply | To 11 | View Replies]

To: truthguy

California, Michigan, how’s that “Voting in your own economic interest” working out?


15 posted on 07/07/2009 11:46:44 AM PDT by Lonesome in Massachussets (AGWT is very robust with respect to data. All observations confirm it at the 100% confidence level.)
[ Post Reply | Private Reply | To 11 | View Replies]

To: GOPGuide
Creditors want cash, not IOU's? Say it ain't so. Gee, they're not buying Hope and Change?... Shocking. /sarc

And sad for them, since Calif delivered the big votes for Obama, now what...

16 posted on 07/07/2009 11:47:00 AM PDT by fortunecookie (Please pray for Anna, age 7, who waits for a new kidney.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Seruzawa

It bothers me that they absolutely will not contemplate a simple four-percent cut to everyone’s salary in the state. It buys them a few months, and it may yet require another four-percent cut by November. But to admit defeat and then ask the fed’s for the money....then what? How can the administration agree to any deal without getting them to cut salaries across the board.


17 posted on 07/07/2009 11:47:13 AM PDT by pepsionice
[ Post Reply | Private Reply | To 2 | View Replies]

To: GOPGuide
What California deserves is to go belly up.  The only problem with that is that it's creditors would take the hit.  That wouldn't be right.

I am so angry at our state officials.  Everyone is treating this as if it was a turf war, when it's the fiscal survival of the state and it's creditors we're talking about.

These people are acting like out budget didn't grow by 100% over the last ten years.  They are acting like they can't cut back some of the bloat.

It's just an infuriating time to be a reasoned California citizen, having to watch the consummate buffoonery in Excramento.

                          The following is directed to Freepers who haven't signed up for monthlies...



13% is good.  100% is better.  Let's go Freepers.

Monthly donorship is a good way for us to avoid having to do the Freepathons.  Besides, it's a great way to pony up in style.
If you're on the verge of becoming a monthly donor or you think you would like to up your monthly donation a bit, has Jim got a deal for you. 
Check this out.  There's an added incentive for a limited time only.  (Always wanted to type that...)


Thanks to Freepers who have been frequenting the Freepathon thread to ham it up with folks over there.  It helps to raise the visibility of the Freepathon.

Jump into the Monthly Donorship special thread too.  There are horderves, hot women with short skirts, and beer too.  Alert, the pizza just showed up!  It's a partaaaee...
Ladies, there were 15 lifeguards over there a few minutes ago.  (I'm beginning to feel a bit guilty... heh heh heh...)



18 posted on 07/07/2009 11:50:03 AM PDT by DoughtyOne (_Resident of the United States and Kenya's favorite son, Baraaaack Hussein Obamaaaa...)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Miss Behave
And will ANY of those MEGA-millionaire STARS step up and chip in to pay for today's Jacksonfest DEBT?

I think not.

19 posted on 07/07/2009 11:50:18 AM PDT by Miss Behave (OMG, my tagline is stalking me.)
[ Post Reply | Private Reply | To 14 | View Replies]

To: GOPGuide

The banks are going to stop accepting them? Why would they have accepted them to begin with?


20 posted on 07/07/2009 12:03:04 PM PDT by henkster (Bumper Sticker: Please don't tell 0bama what comes after a Trillion!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Wolfie

“Here comes the Federal bailout.”

No way should the .gov bail out Kalifornia and its electorate.

This should be an absolute line in the sand.


21 posted on 07/07/2009 12:04:47 PM PDT by KeyesPlease
[ Post Reply | Private Reply | To 4 | View Replies]

To: GOPGuide
California plans to issue more than $3 billion of IOUs in July.

That's BILLION with a "B" folks.
22 posted on 07/07/2009 12:12:51 PM PDT by TSgt (Extreme vitriol and rancorous replies served daily. - Mike W USAF)
[ Post Reply | Private Reply | To 1 | View Replies]

To: GOPGuide

Wasn’t Arnold supposed to fix the credit crisis?


23 posted on 07/07/2009 12:16:51 PM PDT by coconut47
[ Post Reply | Private Reply | To 1 | View Replies]

To: Seruzawa

http://www.ebudget.ca.gov/agencies.html

The total budget is $134 billion and they need to cut $24 billion or about 18%.


24 posted on 07/07/2009 12:44:32 PM PDT by cowtowney
[ Post Reply | Private Reply | To 2 | View Replies]

To: truthguy

Now Californians, being the wonderful folk they are will try to get the citizens of the other 49 states to pay for their extravagance
____________
Yea BS BS and more BS. They try that crap I swear I will stop paying any taxes. Let them come and get me.


25 posted on 07/07/2009 12:49:36 PM PDT by mojitojoe (All tyranny needs to gain a foothold is for people of good conscience to remain silent.)
[ Post Reply | Private Reply | To 11 | View Replies]

To: Wolfie; KeyesPlease
Here comes the Federal bailout.

They want the rest of the country to pay for their insolvency. Will people FINALLY stand up when it comes to bailing out other states? You know it's going to come to this! So not only will we be on the hook for the US national debt, we'll also start getting stuck for various states who can't balance their budget.

26 posted on 07/07/2009 12:54:18 PM PDT by boxlunch
[ Post Reply | Private Reply | To 4 | View Replies]

To: wafflehouse; Leisler; PAR35; TigerLikesRooster; AndyJackson; Thane_Banquo; nicksaunt; ...
*Ping!*
27 posted on 07/07/2009 12:58:41 PM PDT by rabscuttle385 ("If this be treason, then make the most of it!" —Patrick Henry)
[ Post Reply | Private Reply | To 1 | View Replies]

To: henkster
Why would they have accepted them to begin with?

Most of the big banks still standing in California do so only because of massive taxpayer bailouts. Maybe they should stop trying to speculate on oil futures and buy smaller solvent banks for a couple of days use some of that money to do actual banking for a change.

28 posted on 07/07/2009 1:30:02 PM PDT by jiggyboy (Ten per cent of poll respondents are either lying or insane)
[ Post Reply | Private Reply | To 20 | View Replies]

To: razorback-bert
California could secede and then nationalize The San Francisco Mint
29 posted on 07/07/2009 2:47:07 PM PDT by Aroostook25
[ Post Reply | Private Reply | To 10 | View Replies]

To: truthguy
Schwarzenegger has been exposed as a dismal failure.

Schwarzenegger for Vice President!

30 posted on 07/07/2009 2:48:17 PM PDT by Aroostook25
[ Post Reply | Private Reply | To 11 | View Replies]

To: GOPGuide

Who’s getting these IOU’s instead of cash? If thousands of state workers start getting IOU’s in lieu of a paycheck and they cannot redeem for cash, things are going to get mighty ugly fast.

Any vendors, in state or out of state, who are getting IOU’s and continue to do business with CA are abject fools.


31 posted on 07/07/2009 2:53:44 PM PDT by randita
[ Post Reply | Private Reply | To 1 | View Replies]

To: DoughtyOne

Let the creditors take the hit. Buyer beware - don’t do business with people who can’t pay you.


32 posted on 07/07/2009 3:04:51 PM PDT by JTHomes
[ Post Reply | Private Reply | To 18 | View Replies]

To: GOPGuide

California is too big to fail. Obama will save us. Hurrah!!


33 posted on 07/07/2009 3:17:26 PM PDT by Jim Robinson (Follow me on Twitter: http://twitter.com/jimrobfr)
[ Post Reply | Private Reply | To 1 | View Replies]

To: JTHomes

The problem with the creditors taking the hit, is that it affects many people. I don’t want my state affecting people outside the state. That isn’t right.

We got ourselves into this mess and we should get our selves out of it. We’re not a poor state. We’ve mismanaged ourselves into this mess. We need to buck up and fix it.


34 posted on 07/07/2009 3:30:54 PM PDT by DoughtyOne (_Resident of the United States and Kenya's favorite son, Baraaaack Hussein Obamaaaa...)
[ Post Reply | Private Reply | To 32 | View Replies]

To: Aroostook25
Not Qualified via US Constitution if that means anything anymore.

Obama may not be qualified. At least with Schwarzenegger we know he is a naturalized citizen.
35 posted on 07/07/2009 3:38:29 PM PDT by truthguy (Good intentions are not enough!)
[ Post Reply | Private Reply | To 30 | View Replies]

To: Seruzawa

Both the Governator and the Dimwits in charge are basically sleezy idiots. The state is BROKE. There is no responsible adult in charge of the institution.


36 posted on 07/07/2009 6:10:27 PM PDT by pointsal
[ Post Reply | Private Reply | To 2 | View Replies]

To: Wolfie
Here comes the Federal bailout.

I'm inclined to doubt it, for two reasons. 1) The fedgov is broke already, and things are not getting better. 2) If they try to bail out Colleyforrnya, congresscritters from about forty other states will be digging in and saying "If you want my vote you can sign my state up too." "

37 posted on 07/07/2009 6:58:06 PM PDT by hinckley buzzard
[ Post Reply | Private Reply | To 4 | View Replies]

To: GOPGuide
Well, California is the Gold Rush state... maybe they should just mint small California gold coins and use those as currency. The Constitution allows (assuming we still have a constitution) states to issue gold and silver coins. Just a thought...
38 posted on 07/07/2009 9:38:15 PM PDT by April Lexington (Study the constitution so you know what they are taking away!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: GOPGuide
The Oracle of Lexington speaketh: “You know, when a relatively small handful of people destroy the economic well being of over 56 million people, the 56 million people should get off their *sses and depose the handful of people. Slaves is slaves, dude!”
39 posted on 07/07/2009 9:43:29 PM PDT by April Lexington (Study the constitution so you know what they are taking away!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: razorback-bert
Why are these *ssholes blaming the GOP???
40 posted on 07/07/2009 9:45:29 PM PDT by April Lexington (Study the constitution so you know what they are taking away!)
[ Post Reply | Private Reply | To 10 | View Replies]

To: mojitojoe
Yea BS BS and more BS. They try that crap I swear I will stop paying any taxes. Let them come and get me.

Excuse me, sir. But, I'd like to introduce you to a friend of mine. Mr. Gault. Mr. John Gault...

41 posted on 07/07/2009 9:48:17 PM PDT by April Lexington (Study the constitution so you know what they are taking away!)
[ Post Reply | Private Reply | To 25 | View Replies]

To: cowtowney

Why can’t they just cut everything by 18% then? All spending for everything. Why should people in the private sector pay higher taxes when it is people who are on the government payroll that benefit the most from government spending? They need to aggressively stop illegals too from getting free services. What is wrong with those people? The federal Government shouldn’t do a thing to help. If they help, then they are just encouraging the government to continue to take advantage of the taxpayer.


42 posted on 07/08/2009 7:10:24 AM PDT by rodeo-mamma
[ Post Reply | Private Reply | To 24 | View Replies]

To: ClearCase_guy

I think you’re on to something. This Cali thing could be the tipping point for many people. Wonder what will happen then??


43 posted on 07/08/2009 7:13:38 AM PDT by refermech
[ Post Reply | Private Reply | To 5 | View Replies]

To: Wolfie

Right, because the second Goldman Sachs accepted these IOU’s, is the second that the Federal Government implicitly backed them, because, after all, Goldman Sachs is “too big to fail.”

Curses on the thieves (and their ilk) that run Goldman Sachs (and you know exactly who I’m talking about).


44 posted on 07/08/2009 7:13:49 AM PDT by Boiling Pots (B. Hussein Obama: The final turd George W. Bush laid on America)
[ Post Reply | Private Reply | To 4 | View Replies]

To: truthguy

**will try to get the citizens of the other 49 states to pay for their extravagance.**

Actually, they want to get the Chinese to pay for it, while making your children and future grandchildren pay them back for it.


45 posted on 07/08/2009 7:16:46 AM PDT by Boiling Pots (B. Hussein Obama: The final turd George W. Bush laid on America)
[ Post Reply | Private Reply | To 11 | View Replies]

To: rodeo-mamma
Why can’t they just cut everything by 18% then?

Indeed. There seems to be an attitude that "times are tough", and that productive people who pay taxes need to suck it up, do a little suffering, and pay whatever amount is demanded of them.

Why can't that be turned around? Times are tough, non-productive people need to suck it up, do a little suffering, and get by with 18% less.

46 posted on 07/08/2009 7:17:39 AM PDT by ClearCase_guy (I don't believe anything anyone says about anything anymore.)
[ Post Reply | Private Reply | To 42 | View Replies]

To: Boiling Pots
Curses on the thieves (and their ilk) that run Goldman Sachs (and you know exactly who I’m talking about).

Did GS take TARP money, and are there now federal regulators who take their marching orders from Obama and a Democrat controlled Congress involved in their decision making process as a result? I think the Rats found a way to put us all on the hook for their failed socialist experiments in Sacremento.

47 posted on 07/08/2009 7:20:46 AM PDT by tacticalogic ("Oh bother!" said Pooh, as he chambered his last round.)
[ Post Reply | Private Reply | To 44 | View Replies]

To: MikeWUSAF
Pikers. Lets go all the way to Zimbabwe broke....

Photobucket
48 posted on 07/08/2009 7:21:39 AM PDT by Kozak (USA 7/4/1776 to 1/20/2009 Reqiescat in Pace)
[ Post Reply | Private Reply | To 22 | View Replies]

To: ClearCase_guy
Indeed. There seems to be an attitude that "times are tough", and that productive people who pay taxes need to suck it up, do a little suffering, and pay whatever amount is demanded of them.

I notice that labor unions are going to be exempt from having thier health care benefits taxed. Apparently some of us are being expected to "suck it up" more than others.

49 posted on 07/08/2009 7:22:44 AM PDT by tacticalogic ("Oh bother!" said Pooh, as he chambered his last round.)
[ Post Reply | Private Reply | To 46 | View Replies]

To: Aroostook25
California could secede and then nationalize The San Francisco Mint

6th (or so) largest economy in the world.
Their own mint.
World-class breadbasket.
Major international sea & air ports.
Border is is mostly secluded & buffered (ocean, desert, few roads).
Failing government.
Significant fraction of population wants soveriegnty.

I expect independence & regime change declared in CA soon.

50 posted on 07/08/2009 7:32:09 AM PDT by ctdonath2 (John Galt was exiled.)
[ Post Reply | Private Reply | To 29 | View Replies]


Navigation: use the links below to view more comments.
first 1-5051-52 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson