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| Economy |
| California IOU holders may turn to check cashers |
| 2009-07-08 |
| California "IOU" recipients can turn to credit unions and check-cashing storefronts if a state budget deal does not appear by Friday and if three major banks refuse to accepting the notes beyond Friday as planned, analysts said on Tuesday. The willingness of the smaller institutions to take IOUs from the cash-strapped state should also stop the development of a secondary market for trading them, although individuals could end up paying hefty fees to get their hands on cash. The state government of California, the world's eighth largest economy, is experiencing a severe revenue slump brought on by recession, rising unemployment and the lengthy housing downturn, forcing it to issue IOUs in lieu of some payments. The government of the most populous U.S. state began its fiscal year on July 1 with a $26.3 billion budget gap and risks burning through its cash unless Governor Arnold Schwarzenegger and lawmakers quickly balance the state's books. Most U.S. states are not permitted to run budget deficits. Three major banks are currently accepting the IOUs, but only through Friday. After that recipients may turn to credit unions to cash them or, perhaps, to check-cashing storefronts. Their cashiers could see more than $3 billion of the IOUs at their windows this month should the state budget crisis persist and big banks hold to their Friday cut-off for processing them. Check-cashing storefronts are especially well poised to score IOUs, said Daniel Penrod, a senior industry analyst at the California Credit Union League. "I could see a lot of bank customers turning to a third-party source and losing a lot of their paycheck," Penrod said. |
| Posted by:tipper |
| #5 "Has the California state government (Governor Schwarzenegger, I assume) announced any plan for that to take place at some fixed future date?" I think I read someplace that they're supposed to redeem the scrip in the fall (October?), including interest, tw. So they're still living in fantasy-world. They ain't gonna redeem jack. :-( |
| Posted by: Barbara Skolaut 2009-07-08 21:22 |
| #4 The first rule of scrip is that after the final transaction it can be turned in to the issuer for actual money. Has the California state government (Governor Schwarzenegger, I assume) announced any plan for that to take place at some fixed future date? |
| Posted by: trailing wife 2009-07-08 19:56 |
| #3 Using scrip of any kind means that you have to follow the rules of scrip. The first thing is to have "buy in" from the retail community. Forget banks, because you do not want IOUs to be saved, but spent. Saving them defeats the purpose. |
| Posted by: Anonymoose 2009-07-08 10:27 |
| #2 "forcing it to issue IOUs in lieu of some payments." They are not entirely out of cold hard cash. Rather, they are CHOOSING who to give the cash to and CHOOSING who to give the IOUs to. Prioritization right there. The department issuing IOUs is not important. Abolish that department and its jobs and its laws and its positions. Rinse, repeat. |
| Posted by: Ptah 2009-07-08 10:25 |
| #1 I could see a lot of bank customers turning to a third-party source and losing a lot of their paycheck," Penrod said. Barry to step in soon and.... save the people. |
| Posted by: Besoeker 2009-07-08 07:53 |