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.
Excuse me, sir. But, I'd like to introduce you to a friend of mine. Mr. Gault. Mr. John Gault...
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.
I think you’re on to something. This Cali thing could be the tipping point for many people. Wonder what will happen then??
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).
**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.
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.
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.
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.
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.
“Why can’t they just cut everything by 18% then?”
That’s funny. You obviously haven’t heard the CA Demos speak.
They don’t call it LaLa land for nuttin’.
Still, from all I have read, not one goobermint program cut from the tumor infested bloodsucking spend spend spend liberal elite state run system.
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