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.
"took" suggests that they all wanted it. We know that some of them were "encouraged". The feds basically destroyed BofA with the forced merger.
> People in California helped bail them out
Actually, most of the bail out money came from outside CA. Do you really think that those folks want their "investment" pissed away in CA?
> if they're asking for your help it seems only fair to give it to them.
Actually, "the people of CA" aren't doing any such thing. The state govt is passing out script while it flails around, hoping that the money unicorn will poop some golden bricks.
> I seriously doubt that Obama would allow these IOUs to actually be worthless so what's the risk exactly?
I'm sure that folks outside CA are happy to read that.
Most of it did come from outside of CA but a decent amount of it did come from CA. I'm not saying this is a great idea under normal circumstances-just these circumstances.
> I'm not saying this is a great idea under normal circumstances-just these circumstances.
What, exactly, is this "great idea", what are the circumstances that make that idea "great", and "great" for whom?
I think that loaning money to the state of CA is like giving booze to a drunk. That would be bad (for the drunk) if Bill Gates did it, but taking money from folks who are hard pressed (general taxpayers and folks dependent on govt) is even worse.
However, you clearly disagree, so let's see the details.
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.
"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.
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.
"The banks" are not a monolithic entity. My credit union, which is my only bank, has not been "bailed out", so you're OK with them not taking IOUs like that, right?
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!
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.
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.
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.