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.