Skip to comments.California IOUs can be considered securities, SEC says
Posted on 07/12/2009 3:26:38 AM PDT by TigerLikesRooster
California IOUs can be considered securities, SEC says
Agency guidance helps create a secondary market for IOUs, helping with prices
By Ronald D. Orol, MarketWatch
WASHINGTON (MarketWatch) -- The Securities and Exchange Commission late Thursday issued guidance identifying the IOUs being issued by California as "securities," rather than just obligations of the economically troubled state.
The Golden State issued the IOUs last week to conserve cash and pay off bondholders.
"The staff of the SEC has expressed its belief that California's recently issued IOUs are 'securities' under federal securities law. As such, holders of these IOUs and those who may purchase them are protected by the provisions of the federal securities laws that prohibit fraud in the purchase or sale of securities," the agency said.
The regulator is recommending that the IOUs, which carry an annual interest rate of 3.75%, be regulated as municipal debt, a form of security, by the Municipal Securities Rulemaking Board.
Identifying the IOUs as securities creates a regulated secondary market for them, which make it easier for their holders to sell them at a fair price.
Tom Dresslar, a spokesman for California State Treasurer Bill Lockyer, lauded the SEC's announcement, saying in a statement: "The SEC has sent a pretty clear warning to folks who plan to profit by buying and reselling IOUs: If you're not registered as a municipal securities broker-dealer, you run the risk of violating federal law."
(Excerpt) Read more at marketwatch.com ...
This makes it harder for a person with a $1 million IOU to sell it to you or me for $900,000. Illegal actgually.
This makes the situation worse.
So no California can print “securities” to pay its bills...
In the old days that was called defaulting on your debts...
But the Federal government doesn’t want anyone to notice that California has defaulted on its debt so they put up smoke and mirrors and try to continue the illusion that California is a-okay...
But Mr. Obama can screw millions of General Motors and Chrysler shareholders and bondholders out of billions of dollars? Which way to the looking glass?
Maybe I could just print up some nifty IOU’s and go on a shopping spree. Or maybe.... I know, hire a new employee for my design company and pay him with IOU’s.
When money becomes worthless, then what are we going to use?
"Gold! Just tell them that Gordon Liddy sent you!"
“California IOU’s can be considered securities?”
Bananas, bananas, 39 cents a pound!
Or some insider will offer to purchase them for pennies on the dollar knowing the “next” CA gov will more then likely be able to raise taxes to pay them off.
Same ol’ Story in CA, two wolves and lamb looking at a menu..
“So no” was supposed to be “So now”... Sorry...
Thats the thing I was seeing: if these ARE securities, CA could declare bankruptcy and make them go away like GM and Chrysler did to even their secured debt holders.
[Where are the lawsuits about that, btw???]
Next time you go to the bathroom STOP AND THINK! Do you really want to waste thousands of dollars in securities just to have a clean butt? :-)
Thanks for posting TLR. Disgusting.
These con-men are putting us in dire straits. We need to bang the drumsticks/clubs on their collectivist heads...(music to read this thread by)...
I guess the next step wtill be Obama mandating that the banks accept the IOUs.
There's a difference?
some might find this interesting:
Now pay attention to this. The big banks are INSOLVENT.
Then there’s this:
CIT as in Citibank.
Is it going to happen? Who knows. But the notion that is might be out there is plenty scary, don’t you think?
Nothing like having an economic nitwit, who is “set for life” in charge of the situation, gang.
He gets to play with the “house money.”
Madoff must be thinking and they put me in jail?.
Maybe they can get Citigroup to buy these “valuable” securities. If not, then Buffett and Soros will have to pick up the slack.
United States Constitution Article 1 Section 10: Limits on the States.
The final section of Article One outlines the limits on the powers of the States:
Section 10, Clause 1 (Contracts Clause): No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
WOW ! Fantastic ! Where can I buy some of these “securities” ?
So the IOUs are really 0% bonds? Interesting. I wonder if they’ve figured out how that is going to effect their already crappy bond rating.
I wonder how long it will take the SEC to give them a triple AAA rating?
California IOUs can be considered worthless securities
The regulator is recommending that the IOUs, which carry an annual interest rate of 3.75%, be regulated as municipal debt, a form of security, by the Municipal Securities Rulemaking Board. Identifying the IOUs as securities creates a regulated secondary market for them, which make it easier for their holders to sell them at a fair price. Tom Dresslar, a spokesman for California State Treasurer Bill Lockyer, lauded the SEC's announcement, saying in a statement: "The SEC has sent a pretty clear warning to folks who plan to profit by buying and reselling IOUs: If you're not registered as a municipal securities broker-dealer, you run the risk of violating federal law."Wow, it's almost as if the SEC is helping out some jokers who made campaign contributions to Obama. But what are the odds of that?
California IOUs are about as worthless as Zimbawe’s bank notes..they might make nice wallpaper, but California environmental restrictions probably preclude burning them for heat.
Pay your CA and fed taxes with the IOUs and see what happens.
So, is the SEC sanctioning another derivatives market? It’s done some well overseeing the others; then again, California does remind me of AIG.
I won’t take them. I’d go to jail first, and do not plan to go willingly, if at all.
I’m thinking of opting out of US paper currency as well, joining the “white market” that accepts nothing other than gold or silver for all transactions.
Too much room with fiat currency for predators and parasites to play games, and predators and parasites are all that’s left in Washington.
.....What is a person or company to do knowing they must contractually perform for the state only to be paid in IOU's that will most likely not pay anytime soon?
Kalifornia needs to get it's head out of it's rear end, cut programs, and resume paying it's debts. I CAN be done.....
Wimpy to Popeye, I will gladly pay you Tuesday for a hamburger today.
The IOU's pay 3.75% (annual rate), supposedly tax-exempt. Perhaps that is why some banks are honoring deposits of IOU's -- for in addition to retaining customers, matching the other banks' policies, and not raising the ire of the state government, maybe the banks hope to collect the higher interest rate? If eventually the IOU's bounce, the banks can always take the money back from the customers and possibly charge them NSF/bounced-check fees.
But, unless you're a bank, bonds are better investments, unless one can get a good discount off the face value of the IOU's. Bonds are paid before these IOU's, and given CA's declining credit rating, the bond yields may even be higher.
Doesn't a securities issuer need to file some SEC paperwork or comply with some rules before issuing the securities? These IOU's became "securities" after they were issued, and the recipients had no choice whether they wanted to "invest" in these "securities."
thanks for that correction. I should have performed some due diligence before posting something from an email without independently confirming it.
We sure as heck have enough bad news (for real!) around here without me “winging it.”
Hold on there. The new rules of bankruptcy under Obama now place bond holders at the back of the line behind unions, newly force-issued government owned stocks, and ACORN.
I don't put it past the state or federal government to arbitrarily decide that those honoring the new socialist IOUs deserve more than the old capitalist bond holders.
But thanks for the info on the IOU's interest status.