California: Big Banks Tell Gov. Schwarzenegger No More IOUs
Posted By Vicki McClure Davidson on July 7, 2009
California’s escalating financial mess just got a whole lot messier. And you’d have thought the behemoth Michael Jackson funeral circus was a big enough problem today for the city of Los Angeles:
From Reuters: Michael Jackson memorial service:
Police, security, escorts and sanitation for the memorial ceremony are expected to cost cash-strapped Los Angeles city council nearly $4 million. The city council on Tuesday launched a web site asking for fans to make donations toward the cost of hosting Tuesday’s events.
But the state’s money problems have gotten worse; Los Angeles’ $4 million bill for Jackson’s memorial service is merely a drop in the bucket.
California governor Arnold Schwarzenegger’s decision last week to begin issuing IOUs instead of cash to vendors and contractors to forestall or offset the state’s enormously growing debt has not amused anyone, especially the banks.
A group of banks on Friday said they would stop accepting the IOUs. So, it looks like California officials will have to slash elsewhere, and do it pronto. Asking soon-to-be-former Gov. Sarah Palin for advice on running a fiscally responsible state is no longer an option.
Might I suggest that all of these high-ranking elected servants of the public take a pay cut? And then slash/dump all the welfare entitlements to illegal aliens? And then have a serious sit-down talk with the state’s many union leaders?
Nah… too logical. Let’s cut back on police and fire fighters and teachers instead! OK… they didn’t actually SAY that, but I’m pretty confident that they’re thinking it.
Big Banks Don’t Want California’s IOUs
Wall Street Journal | By Ryan Knutson
July 7, 2009A 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 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.
But now, 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. When the IOUs mature, holders will be paid back directly by the state at an annual 3.75% interest rate. Some banks might also work with creditors to come up with an interim solution, such as extending them a line of credit, said Beth Mills, a California Bankers Association spokeswoman.
Meanwhile, on Monday morning, a budget meeting between Gov. Arnold Schwarzenegger and legislative leaders failed to produce a result. Amid the budget deadlock, Fitch Ratings on Monday dropped California’s bond rating to BBB, down from A minus, the latest in a series of ratings downgrades for the state.
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…
More about California’s financial woes:
Right Pundits: Banks Tell California: No IOUs
GayPatriot: The Fall of the Governator: Will he be back? and Blaming California Voters When They Should be Confronting Public Employee Unions
Hot Air: Big banks saying no to California IOUs and Schwarzenegger Plays Hardball While Democrats Debate Whether Cowtails Should Be Amputated and AIP Column: Obama’s Utopia and CA Democrats solution: Spend money they don’t have and Crazy Arnie: Everything must go! Update: Reason says, “Hasta la vista, baby” and California tax revolt: Voters crush Schwarzenegger’s budget proposals at the polls
Parrothead Jeff: Mourning the Death of California
Ed Driscoll, Pajamas Media: Airbrush Alert
DoozieLife: California IOUs
Conservative Libertarian Outpost: California Politics, it’s not just the budget
LA Times: Schwarzenegger says he got voters’ message ‘loud and clear’ and Gov. proposes selling L.A. Coliseum, other properties to raise cash and California elected officials’ pay will be cut 18%
Michelle Malkin: Ready to go Galt in L.A. and Californicating Oklahoma and Nice “work” if you can get it and No “robust debate” on amnesty and Latinos to Obama: You still owe us more and The Taxinator loves his open-borders welfare state and The Arnie-Barry lovefest and The paper of labor and What the Sacramento Bee really thinks of voters and California to tax-and-spenders: No, no, no, no, and hell no and California: The poster child for dysfunction and Live from the Cali tax revolt and What George Will missed: The decrepit state of the California GOP
James Hudnall, Big Hollywood: So Goes California, So Goes the Nation
Fire Andrea Mitchell!: Hey, Arnold, we are not your ATM! and 10,000 workers in Mexifornia to be laid off.
Iowahawk, Big Hollywood: Fans Flock to Mourn California, 1849-2009
Infidels Paradise: Does Arnold Have An IOU For Jacko’s Funeral Security?
Around The Sphere: They Don’t Have The Do-Re-Mi
California Chronicle: Garamendi Says the Coast of California is Now Up for Sale to Big Oil
Maggie M. Thornton, Right Pundits: California Voter Revolt: Schwarzenegger Budget Propositions Defeated
The Gaea News: Schwarzenegger says California should examine other nations’ experiences in taxing marijuana
La Shawn Barber’s Corner: SacBee Rants Against Voters, Then Lies About Rant
Washington Times: Schwarzenegger knocks Calif. voters
Reason Magazine, Hit & Run: Gov. Arnold: San Quentin, I’ll Sell Every Inch of You!
Bill Whalen, Wall Street Journal: What If Arnold Had Seized the Moment?
Jonathan Lloyd, NBC Los Angeles: Schwarzenegger: High Time for Marijuana Debate
Olsen Ebright, NBC Los Angeles: Six-Figure Salaries No More for Calif. Officials
Jim Blazsik: The Top and Bottom 10 States for Overall Freedoms
Blue Crab Boulevard: What The National Media Is Not Telling You
American Thinker: It really isn’t that complicated
Frugal Café Blog Zone: Unemployment Hodge-Podge: Government Struggling to Help Families Applying for Aid for First Time
Bob’s Bites: Go Ahead, Laugh at California. You Are Next
Frugal Café Blog Zone: No Santa Claus for Arnie: Californians Weary of Increased Taxes, ‘Governator’ Unhappy with Voters
About the author
What do illegals cost California? What is the amount of the deficit?
I applaud Gov. Schwarz… for standing firm on no more taxes, however, what about ridding our state of some hemorrhaging arteries? Illegals are costing us billions and I hear nothing about lowering the boom on them except for re-deporting illegalswithin our penal system. A big DUH for that . And I agree about our unions (shhhh, I’m in one). They are literally bleeding our education system. (Where did the teacher’s union get $1MIL to donate against Prop. 8? I voted yes on 8, but our union money went against it. hmmmm) Well, I have to go now to see if I qualify for a mortgage modification.
I have read that there are approximately 3 million illegal aliens in California. If all welfare/taxpayer-funded entitlement programs for illegals ceased, it would be equal to a range of 12 – 20 percent (numbers fluctuate, depending on what you read) of the total California deficit. Schwarzenegger said the amount was too small to even be considered. I wholeheartedly disagree, and I’m not the only one.
To me, that’s a hefty chunk of budget slashing, and would be a strong action towards bringing California out of its debt hell hole. It’s nonsense to dismiss such a prudent cost-cutting effort simply because it wouldn’t erase the entire debt… stupid thinking. Combine it with other cost-cutting measures (like trimming the salaries of government officials by 10 to 20 percent, and I’m sorry, Paula, what is paid to union leaders), plus a few other areas of trimming, and California could quickly recover economically. Also, LOWER taxes. This would prompt Californians to stop hoarding money and rejuvenate the economy. Sales tax would suddenly surge, going into California government coffers. Within a few months, things could be almost normal again.