Well, would you take one? And it isn't simply because they might be worthless. What rule changes might a government enact after you've been roped in to some arrangement? In short, I just don't believe people tend to trust government at any level to play things straight. They always have a way of arranging things in their favor, somehow - even if they need the Federal Government to make it happen.
Big Banks Don't Want California's IOUs
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.
Dorothy Cottrill of the state controller's office inspects IOUs last week.
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.
These IOUs are simply cut rate loans (3.75% annual interest rate). If nobody would loan them money at those rates (which nobody would), then why would anyone accept an IOU paying those rates?
Posted by: tim maguire | Tuesday, July 07, 2009 at 12:13 PM
I'm sure the Federal government will be only too happy to throw a few dozen billion California's way, afterall, what are tax dollars for?
What a pathetic spectacle, if, as has been said many times, CA is always ahead of the curve, then, this is what we've got to look forward to, and I don't doubt it one bit.
I guess we should be happy that at least for now the banks have the gumption and the legal right to say no to IOU's from a bankrupt entity....but, legislation closing that loophole is surely just around the corner.
Posted by: anon | Tuesday, July 07, 2009 at 12:41 PM
Uh...can I buy these with my old Confederate money or Czarist Russian currency?
Posted by: Philip McDaniel | Tuesday, July 07, 2009 at 02:33 PM
California has oil. They can drill.
Posted by: Mark_0454 | Tuesday, July 07, 2009 at 03:02 PM
"California has oil. They can drill."
why waste a precious resource? they can just tax the rich more...
not like the rich will leave the state or anything.
as an aside...is this legal?
in theory the IOU's are currency. Wonder if the IRS will take them in lieu of sending real money.
Posted by: mark l. | Tuesday, July 07, 2009 at 03:09 PM
"I'm sure the Federal government will be only too happy to throw a few dozen billion California's way, afterall, what are tax dollars for?"
too late. the stimulus should have been doled out among the states, 351 billion to meet every state budget shortfall for the year, thus preventing massive layoffs at the state level and masking the size of CA's debt by everyone else taking money.
While it is the BEST way of staving off short term unemployment, it provides too much support to state govts, which the admin wants to eliminate. The admin wants state govts to fail, increasing the reliance upon federal govt.
Posted by: mark l. | Tuesday, July 07, 2009 at 03:14 PM
Out of all the states in the union California has the most billionaires, 77 to be exact, Florida is next then New York.
How come these Blue states which got Obama elected never seem to spread their wealth around to anyone as they always promise.
Posted by: syn | Tuesday, July 07, 2009 at 03:24 PM
"The admin wants state govts to fail, increasing the reliance upon federal govt."
And then what? I think that it's wrong to assume that anyone in the admin has any kind of real plan beyond "blame Bush".
Posted by: xerocky | Tuesday, July 07, 2009 at 04:16 PM
"How come these Blue states which got Obama elected never seem to spread their wealth around to anyone as they always promise."
this is the gaping hole in current socialist theory. there is no wealth tax. the reason there is no wealth tax? because the billionaires are funding the socialists to go after high wage earners. Why bite the hand that feeds them.
what are the chances of media matters or kos offering a wealth tax?
soros owns both.
Posted by: mark l. | Tuesday, July 07, 2009 at 08:05 PM
its certainly a sticky situation for California, anything they do can't really help right now unless they did something drastic to generate tax money, like legalize marijuana, but thatll prolly be a long way off and California will be drifting off to Russia. www.yovia.com/blogs/timlara
Posted by: Tim Lara | Wednesday, July 08, 2009 at 03:16 PM