This is more bad news for the state in the sun---run by Arnold.

From the WSJ: 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 ... if California continues to issue the IOUs, creditors will be forced to hold on to them until they mature on Oct. 2, or find other banks to honor them.

...

The group of banks included Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and J.P. Morgan Chase & Co., among others.

I guess the banks don't think the 3.75% annual interest rate is worth the risk for a "BBB" rated debtor on the Rating Watch Negative list.

What a mess.

Duncan has a plan:

As I've said, I'm not sure what the Feds should do for California, but perhaps having the Fed guarantee California's IOUs, assuming they have that authority, so that banks will cash them for their customers might not be such a bad idea. It's just a bandaid for the overall problem, but will help some pretty needy people who need the cash.

I asked for California to get a bailout from President Obama in an earlier post instead of the IMF because soon, the money will dry up completely. I know a bailout won't solve the problem because we have the most frakked up legislative process in the US and that needs to really, really, really be fixed. Conventional thinking is that if we were to receive help then we'll never fix the problem. I agree with that, but what happens when the state is broke and nobody will play with us? As for Arnold, I'll take a phrase that Chief Brenda Leigh Johnson of The Closer commonly uses: Thank you, thank you so much.

Clearly, some people are just looking out for themselves. And these are the ones we count on to look out for the rest of us? Oy. I wonder if this falls into the "moving ahead" category, or is anyone going to look into this?

WASHINGTON -- As financial markets tumbled and the government worked to stave off panic by pumping billions of dollars into banks last fall, several members of Congress who oversee the banking industry were grabbing up or dumping bank stocks.

Anticipating bargains or profits or just trying to unload before the bottom fell out, these members of the House Financial Services Committee or brokers on their behalf were buying and selling stocks including Bank of America and Citigroup -- some of the very corporations their committee would later rap for greed, a Plain Dealer examination of congressional stock market transactions shows.

Financial disclosure records show that some of these Financial Services Committee members, including Ohio Rep. Charlie Wilson, made bank stock trades on the same day the banks were getting a government bailout from a program Congress approved. The transactions may not have been illegal or against congressional rules, but securities attorneys and congressional watchdog groups say they raise flags about the appearance of conflicts of interest.

"I don't think that any of these people should be owning these types of financial instruments," said Brian Biggins, a Cleveland securities lawyer and former stock brokerage manager. "I'm not saying they shouldn't be in the stock market. But if they're on the banking committee and trading in these kinds of stocks, I don't think that's right."

Well! This certainly should be an interesting summer:

WASHINGTON – A House panel has subpoenaed documents that lawmakers say could shed new light on Federal Reserve Chairman Ben Bernanke's role in Bank of America's acquisition of Merrill Lynch.

The subpoena comes ahead of a hearing next week in which Bernanke is scheduled to testify.

Lawmakers have accused Bernanke and President Bush's treasury secretary, Hank Paulson, of pressuring Bank of America Corp. Chief Executive Kenneth Lewis into the deal and urging him to keep quiet about Merrill's financial problems.

Not divulging that information would have violated Lewis' fiduciary duty to the bank's shareholders.

Lawmakers also have questioned whether Lewis threatened not to go through with the merger in order to squeeze money from the government.

Last night, before select audiences in places like Los Angeles and Chicago out to see other films, Michael Moore played a special trailer for his new movie about the financial meltdown. But this wasn't just any trailer:

Hi, I’m Michael Moore. Instead of using this time to tell you about my new movie I’d like to take a moment and ask you to join me in helping our fellow Americans. The downturn in the economy has hurt many people, people who have had no choice but to go on government assistance. Yet our welfare agencies can only do so much. That’s why I’m asking you to reach into your pockets right now and lend a hand. Ushers will be coming down the aisles to collect your donations for Citibank, Bank of America, AIG, Goldman Sachs, JP Morgan and a host of other needy banks and corporations. Won’t you please give generously? Now, I know what you’re thinking - I already gave at the bailout. And I know you did, but even if you’ve given in the past, give some more. It will make you feel… good.

Sure enough, ushers came down the aisles:

And started passing out the collection cans:

More to the point, audiences laughed and gave:

A writer for FirstShowing was taken aback, and called it "pretty damn crazy." Slashfilm's writer wondered what would happen to the money.

We're told that it actually will be donated to local food banks in the donor cities.

[H/t Jonathan for the pics.]

It was my understanding that there were penalties for early repayment of TARP loans, but this Daily Beast story doesn't mention it. According to them, Goldman Sachs will soon be out from under government control:

Wall Street may have another reason to hate Goldman Sachs: The venerable firm with contacts throughout the federal government looks as though it may be the first financial institution to be allowed to repay government bailout money, The Daily Beast has learned. Repaying its TARP loan would free Goldman from various restrictions, including those on the compensation of key executives.

The decision as to which banks would be given the green light from banking regulators, most notably the Federal Reserve and the Treasury Department, could be made as early as next week, these people say. Goldman already has a tentative approval from the Treasury and is awaiting approval from the Federal Reserve, according to one person with knowledge of the matter.

JP Morgan feels comfortable they have convinced both the Treasury and Fed that they should be allowed to repay the money along with the first group of banks.

During the height of the financial crisis the federal government handed out billions in aid to the big banks in an effort to boost capital levels depleted by bad real estate loans and bonds. While the bailout money helped stabilized a spreading financial panic, it also led to massive government ownership of some of the nation's largest banks and controls on business practices and compensation.

As the financial crisis has abated, some banks, most notably Goldman Sachs, JP Morgan Chase, Bank of America, and Morgan Stanley have said they can now repay the money and get out from under federal control. The government must first approve the measure; last week it announced results of so-called stress tests to determine which banks have the most capital to withstand further erosion in business conditions. The government also announced two conditions to repay the money: The issuance of debt that is not backed by FDIC insurance and sufficient so-called "tier one" capital levels. Tier one capital is the strongest capital in the market.

Based on the stress tests, Goldman Sachs and JP Morgan were deemed to be among the strongest of the big banks; unlike Morgan Stanley, Bank of America and Citigroup, both Goldman and JP Morgan were not required by regulators to raise capital levels. Since that time, officials at Goldman and JP Morgan have been pressuring regulators to allow them to repay the bailout money that was granted from the Troubled Asset Relief Program or TARP.

ConsumerAffairs.com:

Under heavy fire from critics for the bank's losses in the economic meltdown, former Bank of America chairman Kenneth Lewis will step down as chairman, to be succeeded by Dr. Walter E. Massey. Lewis will remain as President and CEO.

All 18 board members were said to "comfortably" resist votes to remove them from the board, but the vote to split the duties of chairman into different posts was successful. Massey, an accomplished scientist and a member of many corporate governing boards, most recently served as president of his alma mater, Morehouse College in Atlanta, Georgia.

The announcement came after a raucous shareholder meeting in Charlotte, North Carolina today, where investors and activists grilled him for pushing the acquisition of debt-riddled Countrywide Financial and Merrill Lynch, as well as for accepting billions in taxpayer money during the first round of bailouts of the financial market last year.

Countrywide, formerly the world's largest mortgage lender, was acquired last year by Bank of America for $4 billion amid rumors that it would seek bankruptcy protection due to mounting losses from the collapsing housing market. The additional acquisition of Merrill Lynch saddled the banking giant with an estimated $70 billion in capital losses, while shareholders saw their investments drop by an average of 76 percent.[..]

The Service Employees' International Union (SEIU) launched a campaign to remove Lewis as chairman, after it was revealed that Bank of America used $25 billion in taxpayer money it received for executive compensation and buyouts of competitors, while squeezing the credit lines of its customers.

SEIU actually liveblogged the shareholder's meeting and deserves all sorts of credit for really holding Lewis's feet to the fire.

I think Lewis should just be grateful that the shareholders didn't opt to treat him the way that Icelanders have treated the bankers that caused their financial crisis. Just sayin'...

I expect a bit of deja vu, in which Obama tells them he's the only thing between them and the pitchforks:

This afternoon President Obama will tell top executives from 14 credit card companies -- including American Express, Bank of America, Discover, MasterCard and Visa -- that greater consumer protections are coming for their customers, with or without their cooperation.

The House Financial Services Committee on Wednesday passed "The Credit Cardholders' Bill of Rights," a bill from Rep. Carolyn Maloney, D-NY, that would require companies to provide a 45-day notice before any rate increase; prevent the companies from retroactively imposing higher interest rates to existing balances; and ban "universal default," which the companies use to raise interest rates on consumers late in payments to completely different creditors.

Oh yeah, universal default. That's the policy that allows them to jack up your credit card rate because your payment to the phone company was late!

Treasury Secretary Tim Geithner, senior adviser Valerie Jarrett, and National Economic Council director Larry Summers will join the president at the meeting.

An industry source tells ABC News that the executives expect to hear from the White House that "the industry is unpopular right now." The source forecasts that the meeting will be "a carrot-and-stick" deal -- the administration will tell the executives that they need their help in dealing with problems such as high interest rates, but they will emphasize the threat of legislation.

"It will be a come-to-Jesus type of meeting," the source said.

No, of course not. Because so far, that little arrangement has been working rather well for them - they got obscenely rich, and we got the tab:

NEW YORK -- Bank of America Corp. rebuffed earlier news reports that its chairman and chief executive, Ken Lewis, intended to suggest to President Barack Obama to separate commercial and investment banking.

The Charlotte bank said in a statement, "Mr. Lewis was referring to people's understanding of banks and how they should view the difference between commercial and investment banks in terms of forming perceptions of their various activities."

The CEO "was not talking about reinstating a legal separation between commercial and investment banking," the statement said. Bank of America bought Merrill Lynch & Co., a major investment-banking and brokerage company, in January.

Mr. Lewis, and the leaders of several big banks, met with President Obama in Washington. Following Mr. Lewis' arrival at the White House, Bloomberg News reported that he said a separation of the two businesses should be considered.

The Glass-Steagall Act of 1933 prohibited banks from having commercial- and investment-banking businesses under one roof, but the law was repealed in 1999 by the Gramm-Leach-Bliley Act. The change followed the merger of Citicorp Inc. with Travelers Corp. Inc. to form Citigroup Inc.

I can barely read this through my empathetic tears:

March 5 (Bloomberg) -- Bank of America Corp. will suffer “grave and irreparable harm” if Merrill Lynch & Co. employees paid $3.6 billion in bonuses just before the firm’s acquisition by the bank are publicly identified, its lawyers said.

Bank of America today filed documents in state court in Manhattan to intervene in a case brought by New York Attorney General Andrew Cuomo to compel former Merrill Chief Executive Officer John Thain to testify about the bonus recipients.

“Neither the individual names nor the job titles bear any reasonable or relevant relationship” to Cuomo’s investigation, the firms argued in the documents. “Nor is there a reasonable or relevant reason to disclose such information to the general public.”

The information Cuomo seeks would provide a “road map” revealing which business lines the banks believe to be most valuable and enable competitors to poach the bank’s top talent, Bank of America argued in the court filing. Disclosure of the information would also cause “internal dissension and consternation,” pose security risks for the exposed bankers and their families, and cause employees to leave, according to the filings.

God, I hate that internal dissension and consternation! And of course, unless they disclose, no one will have a clue that the guy with the Hamptons beach house, private car and driver, gold Rolex and Park Avenue penthouse works on Wall Street. Why, people might even try to steal from them the same way they stole from us!

Gee, what do you suppose Lewis is hiding?

A major legal battle is brewing between Bank of America President Ken Lewis and New York Attorney General Andrew Cuomo because the CEO is refusing to hand over a list of Merrill Lynch executives who received $3.6 billion in questionable bonuses right before the banks merged late last year.

"Bank of America has made the decision they don't want to turn that information over to us and we, therefore, tonight served Bank of America with a subpoena to turn over that information," said Special Assistant to the New York Attorney General Benjamin Lawsky Thursday evening, "and we intend to get that by whatever means is necessary going forward."

Lewis met with the attorney general's office for four hours, and he claimed afterward that he fully cooperated.

But New York officials told ABC News the session with Lewis was ugly and combative. They accused Lewis and the bank of stonewalling, saying they refused to provide a list of which executives got what of the billions in bonuses.