6 ms·

Big Banks Don't Want California's IOUs

14 points by gasull 17y ago

russell 17y ago
Schwarzenegger should follow Palin's lead. He's had any number of chances to fix this and has failed. He doesn't want to raise taxes, but the state is in such dire straits that we need revenue. I don't like higher auto registration fees, but I'm willing to pitch in. His latest objection is that the budget doesn't address welfare fraud. Good grief!
- grellas 17y ago
  A fair point but the problem is multi-dimensional - 40%+ in spending increases during the past four years or so plus severely reduced revenues owing to the recession = lethal mix for fiscal responsibility. The thing is a horrible mess right now. I don't blame banks for not wanting to be paid in funny money, though.
  - anamax 17y ago
    > severely reduced revenues owing to the recession They're only "severely reduced" from a spike in 07. They're well ahead of just a couple of years ago. CA Govt behaves like a stupid lottery winner. When it has a great year, it acts as if all years will be better. You know how this story ends. "Ex-millionare now homeless, bankrupt, sued by three ex-wives, collecting cans and dodging bill collectors."
- gojomo 17y ago
  Four years ago in 2005, Schwarzenegger gave it a try, with his special-election propositions to (1) reduce the political power of the public employee unions who've helped lock-in high spending (prop 75); (2) cap spending growth and increase flexibility, and provide for automatic-continuation in budget stalemates (prop 76); (3) restore some level of competitiveness and partisan responsibility to the state legislature with a redistricting less-captive to party gerrymandering that protects incumbents (prop 77). All were reasonable ideas addressing long-term distortions in California's politics and budgeting. All went down in flames at the polls. He knows "I told you so" doesn't work politically, especially as a lame duck, but he'd be within his rights to say it.
- dantheman 17y ago
  It's not a taxes problem its a spending problem.. They need to reduce the amount of money they spend.
jswinghammer 17y ago
Under normal circumstances I'd be applauding the banks for refusing these IOUs but the banks took bailout money and they do owe something to the people of California morally if not legally. People in California helped bail them out and if they're asking for your help it seems only fair to give it to them. I seriously doubt that Obama would allow these IOUs to actually be worthless so what's the risk exactly? I didn't think the banks could get less popular but apparently they're trying to surprise us all on that front. California is a mess and this latest development certainly hasn't helped.
- patio11 17y ago
  I seriously doubt that Obama would allow these IOUs to actually be worthless so what's the risk exactly? Well, hop on Craigslist and start picking up a few of the smaller denominations that got issued to individual vendors. You'll be doing your part to help Californians in a cash crunch and earning free money at the same time -- what could possibly go wrong.
- cameldrv 17y ago
  The banks got in trouble by giving credit to people who were not creditworthy. It is not clear that California is creditworthy at this point, and they are only offering a 3.75% coupon. These bonds mature in three months. In order to believe that these are as good as cash, you have to believe that there is a 99% chance that California will be good for the money. That is clearly unreasonable given what has happened with the budget so far.
- Dilpil 17y ago
  I wonder how cheaply one could acquire these IOUs? It does seem doubtful that they will lose their value before the dollar loses its.
- ghshephard 17y ago
  From: http://www.sco.ca.gov/5935.html http://www.sco.ca.gov/5935.html "Redeemable by the State Treasury only when the General Fund has sufficient money." A rational, conservative, cautious Bank that is trying to protect its assets would be well advised to be careful about accepting these warrants. One Bail out is enough.

14 points by gasull 17y ago

Schwarzenegger should follow Palin's lead. He's had any number of chances to fix this and has failed. He doesn't want to raise taxes, but the state is in such dire straits that we need revenue. I don't like higher auto registration fees, but I'm willing to pitch in. His latest objection is that the budget doesn't address welfare fraud. Good grief!

grellas 17y ago
A fair point but the problem is multi-dimensional - 40%+ in spending increases during the past four years or so plus severely reduced revenues owing to the recession = lethal mix for fiscal responsibility. The thing is a horrible mess right now. I don't blame banks for not wanting to be paid in funny money, though.
- anamax 17y ago
  > severely reduced revenues owing to the recession They're only "severely reduced" from a spike in 07. They're well ahead of just a couple of years ago. CA Govt behaves like a stupid lottery winner. When it has a great year, it acts as if all years will be better. You know how this story ends. "Ex-millionare now homeless, bankrupt, sued by three ex-wives, collecting cans and dodging bill collectors."
gojomo 17y ago
Four years ago in 2005, Schwarzenegger gave it a try, with his special-election propositions to (1) reduce the political power of the public employee unions who've helped lock-in high spending (prop 75); (2) cap spending growth and increase flexibility, and provide for automatic-continuation in budget stalemates (prop 76); (3) restore some level of competitiveness and partisan responsibility to the state legislature with a redistricting less-captive to party gerrymandering that protects incumbents (prop 77). All were reasonable ideas addressing long-term distortions in California's politics and budgeting. All went down in flames at the polls. He knows "I told you so" doesn't work politically, especially as a lame duck, but he'd be within his rights to say it.
dantheman 17y ago
It's not a taxes problem its a spending problem.. They need to reduce the amount of money they spend.

jswinghammer 17y ago

Under normal circumstances I'd be applauding the banks for refusing these IOUs but the banks took bailout money and they do owe something to the people of California morally if not legally. People in California helped bail them out and if they're asking for your help it seems only fair to give it to them. I seriously doubt that Obama would allow these IOUs to actually be worthless so what's the risk exactly? I didn't think the banks could get less popular but apparently they're trying to surprise us all on that front. California is a mess and this latest development certainly hasn't helped.

patio11 17y ago
I seriously doubt that Obama would allow these IOUs to actually be worthless so what's the risk exactly? Well, hop on Craigslist and start picking up a few of the smaller denominations that got issued to individual vendors. You'll be doing your part to help Californians in a cash crunch and earning free money at the same time -- what could possibly go wrong.
cameldrv 17y ago
The banks got in trouble by giving credit to people who were not creditworthy. It is not clear that California is creditworthy at this point, and they are only offering a 3.75% coupon. These bonds mature in three months. In order to believe that these are as good as cash, you have to believe that there is a 99% chance that California will be good for the money. That is clearly unreasonable given what has happened with the budget so far.
Dilpil 17y ago
I wonder how cheaply one could acquire these IOUs? It does seem doubtful that they will lose their value before the dollar loses its.
ghshephard 17y ago
From: http://www.sco.ca.gov/5935.html http://www.sco.ca.gov/5935.html "Redeemable by the State Treasury only when the General Fund has sufficient money." A rational, conservative, cautious Bank that is trying to protect its assets would be well advised to be careful about accepting these warrants. One Bail out is enough.