Some of the nation’s biggest banks have gotten together and told California that they will no longer accept their 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. …
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.
In other words, quit messing around and close your budget gap. Currently the state of California has about a $24 billion dollar budget gap, and this move by the nations will help push California into finally doing something. Instead of raising taxes, cutting services or doing anything at all really, state law makers have essentially pushed this back further and further.
It is questionable whether these IOUs were legal in the first place. The Constitution provides that the Federal government will provide a common currency for the citizens to use and states are prohibited from creating their own currency. Some have argued that these IOUs are basically nothing more then a California currency. Furthermore, these IOUs are also creating more debt for Californians to have to deal with. Essentially they are actually bonds that carry a 3.75% APR, which really means that Californians are going to end up having to pay more back in the end.
California . . . Obamanomics in action!
July 7th, 2009 at 1:05 pm
Heh, was reminded of a Margaret Thatcher quote “The problem with Socialism is that eventually you run out of other people’s money”.
July 7th, 2009 at 1:41 pm
But California is too big to fail.
July 7th, 2009 at 2:57 pm
[...] about California’s financial woes: Right Pundits: Banks Tell California: No IOUs LA Times: Schwarzenegger says he got voters’ message ‘loud and clear’ and Gov. [...]
July 7th, 2009 at 3:12 pm
[...] Some big ones, too. So the whole IOU thing isn’t going to go over now. The question is: Now that California is backed into a corner, what do they do? Start spending sensibly and get their act together? They’re running out of ways to avoid demonstrating the failure of socialism to their brainwashed masses. [...]
July 7th, 2009 at 3:48 pm
Oh no my goodness you got it all wrong. Obama was born in Hawaii, NOT California.
What I don’t understand is, where is Gray Davis? The conservatives used the energy crisis THEY created to oust him from office (impeach him, essentially), and put that idiot actor in, and now that everything is going down the tubes, its time for a big I TOLD YOU SO!
July 7th, 2009 at 4:28 pm
It’s even worse than you can imagine. Many municipalities have stopped enforcing misdemeanors because they do not have the money to put criminals in jail or take them to court. The very basics of government are failing in California, and there is no real sign it will get better.
If the economy doesn’t start growing soon, this will be what the rest of the country is like. America will no longer be America, just another third world country that can’t provide for its people.
July 7th, 2009 at 4:50 pm
its time for a big I TOLD YOU SO!
Sigh, the special election where the braindead California masses voted down the most common sense measures that was to be put in place to stop the unions from bankrupting the state is the big ITOLD YOU SO!! California cap and trade which drove the big industries out of the state which took jobs away and the govt decided to make up money by taxing people, driving them out of the state too is the big I TOLD YOU SO!! Please educate yourself and stop letting the unions tell you lies that you eat up like candy.
Many municipalities have stopped enforcing misdemeanors because they do not have the money to put criminals in jail or take them to court.
This is what California politicians do everytime, try to cut necessary services so that they can keep doing the handouts, especially to people who are not even supposed to be in the country. California deserves to fail. Good riddance. Let’s give it to Mexico, I’m ready to leave rather than pay for more of this dumb state’s stupid decisions.
July 7th, 2009 at 8:09 pm
Bryan, I don’t see how you can remotely blame this on obama as its been a long brewing story in california going back many years as the state has become progressively ungovernable. Too many mandated programs and an irresponsible legislature and really a failure in property tax collection. Too much dependency on tax revenues in cyclical economies. Obama has hardly been in office six months. Hope you don’t become just another repub spinner too when your capable of much better work.
July 8th, 2009 at 3:33 pm
Brian, I don’t see where I blamed Obama for California’s mess here? I just said that California is a good example of what America at large is going to turn into with continued Obama economic politics; e.g. no fiscal responsibility, unwavering union support and enormous social spending.
July 8th, 2009 at 4:04 pm
Brian, all of those problems you describe (mandated programs, irresponsible legislature, dependency on tax revenue) are problems with Obama’s policies.
Note his projections for our budget were based on unemployment peaking at 8%. That is off by at least 25%, meaning we’re going to see our budget deficits soar way beyond even what he thought was probable.
And he wants to add healthcare to mandated programs.
At this rate, people will stop buying U.S. bonds, which will send our federal government into crisis mode.