Credit Unions and Casinos haven't set 'stop accepting' deadlines.
...
Considering the stories about 'notarized transfers' or whatever to prove that one is a valid holder, I expect that the whole 'one rule for the banks, one for everyone else' thing will continue.

On the plus side: Banks are acting rationally for the first time in a long while.

I have a funny feeling that all of those banks do business with the State.

Should've seen that second paragraph coming... "Some banks might also work with creditors to come up with an interim solution, such as extending them a line of credit."

So, J6P trades in his 3.75% bear chits for a 12% BCLOC (bear chit line of credit) against his tax refund.

The banks securitize the BCLOC. Good arbitrage opportunity in there to lever up 10:1, long bear chits over short CA muni debt, reap the coupon.

Lol. From the article - the banks are dissappointed that Cali is issuing IOU's and Cali is dissappointed the banks won't accept them...

Here we GO! Turbo Timmy to the rescue! Back stop the banks, buy the IOU for a premium price!. Another chance to pump up bank profits at taxpayer expense.

What is so important about Oct 2nd?
Is it harvest time in California?

Uh-oh.

AZ is worst as % of GSP and may be the worst on a per capita basis. I'll have to check.

Default coming at the end of the month. Today California Tomorrow the World!

JP per capita Conn is way worse off than CA.... (Parents live in Conn and were razing me this weekend...)

And what happens when they're still broke on Fri, Oct. 2nd? Bear Chit roll?

"{81% of Schwab active traders neutral or bullish"

Hahahah! they must be growing some great stuff in the Schwab back rooms, everyone is on a contact high.....what a bunch of maroons...if this is a confidence builder...I am running for the hills.

I'm still offering 94.1¢ (plus $18 transaction fee).

I'm still offering 94.1¢ (plus $18 transaction fee).

Better add a notary fee.

Nate,
So they are trying to get out of redeeming these IOUs already then?
Why should they care who redeems them anyway?
What's to stop them from just saying "oh those aren't redeemable" on Oct 2nd?
Seems like they are already playing outside the 'rules'...

I can't wait to see what the thousands of small company/contractors that do work for the state are going to do. You can't pay your workers with IOUs that the banks won't treat as cash. You can't purchase materials/supplies either with an empty checkbook. I don't know what these smaller firms will do, but I would withhold services to the state and put workers on leave immediately to avoid bankruptcy. You can't be held to a contract that requires work for no compensation - the state is defaulting their contracts.

Jim, you assume that the PTB respect contract law...

Doodie,
Nice one.
But seriously, is it really over a million dollars?

Re my earlier CT post:
CT deficit = $8.85B over the next 2 years.

CT population = 3.5M

Deficit per person = $2,500

Nice.

Just met my landlord last night for our renewal. Asked fior a 10% rent reduction and settled on 7%. Got to speaking about house prices. They had asked the lender for a rate reduction on the loan for their principal residence. Instead the lender gave them an 18% principal reduction. Not bad as I didn't think banks were doing principal mods. This was Wachovia.

thats what the news was reporting on the radio this am...

they said that the Lakers got private investors to offest their parade costs but as to date no one has come fwd to do the same for the memorial...

making Michael Jackson a shovel ready project

OMG, that's some sick humor (but totally funny).

Seems like stimulus money from the Feds probably wasn't intended (although one can't be sure with Congress) to provide Frankenstein-like bolts of electricty to very dead bodies. He is dead, isn't he?

Greenlander

Bulls**T. All reagan did was start to borrow from SS. Nothing innovative there. CA does have about 100 billion in Calpers they could raid and survive for another 3-4 years.

Will we get TV ads begging for us to buy "Bank Bonds or State Bonds" like they had during WW2 for War Bonds?
I mean, if these same taxpayers money was good enough from the TARP....What about their money issued from the State?
Sounds like a double standard to me!!!!!

I'm sure this problem would be solved if they just made the IOUs TALF eligible.

CA does have about 100 billion in Calpers they could raid and survive for another 3-4 years. "

Do they or are they playing the numbers game with public pension numbers like was discussed yesterday?

Todays 100Bb is tomorrows mark to market buck two ninty five

Last time I looked, Arizona's drop in revenue was more severe than California's. ... I recall corporate tax revenue drop was forty plus percent, year on year. Federal tax revenue drop about the same. The reason for the severity in part, is because Phoenix and Tucson areas had put all their eggs in one basket.... little manufacturing, headquarters operations, etc.... about 35 plus percent of their local economies depended on housing and related industries.

I just wonder why Arizona hasn't issued IOUs?

FD

Actually Calpers says they have 170 billion

Fiduciary Doodie (profile) wrote on Tue, 7/7/2009 - 8:33 am
reply ignore user
poic,
There is no more Wachovia....

I know but that us who there original loan was through.

apparently accounting semantics... seriously though Tim i wonder what the true value is? Was that report yesterday on public pension accounting or private pension accounting methods?

tim,

Maybe the answer is to raid CALPERS with IOU's obviously it's not unprecedented since we do it to SS.

I am sure folks would rather have their hamburger today....

Looks like we are heading back for 888 on the s&p today, time to start pumping.

(gap between spending and revenue)

Banks applying tightening hand to the testicles of the Federal government. The kleptocrats want their TARP money back via the California conduit, they aren't going to accept rubber state MEFO notes circulated as an internal script to paper over the Federal government's budget deficits.

Picosec,
What makes you think TPTB care one wit about the State Constitution?

Maury the Credit Responsibility Panda wrote on Tue, 7/7/2009 - 10:17 am

Who lives out west with the crazies 'n rest
Responsible Credit Panda!
Who states the terms and facts to you with a test
Responsible Credit Panda!
Don't take that, don't sign there
Don't be stupid says the silly bear
He's come to tell you what's right and wrong
Responsible Credit Panda!

Stress Test II

U.S. Lenders May Have to Raise $300 Billion, Deutsche Bank Says

U.S. Lenders May Have to Raise $300 Billion, Deutsche Bank Says - Bloomberg.com

Tim,

Saw this article, and for some reason I thought of 300 Billion Human Grow Tubes that the banks would have to raise in order to get the $300 Billion...

--bh

I'd bet California would have a balanced budget pretty quickly if it's Congressmen were paid in IOU's, They still get cash.

Ghad... I'm not sure what the banks refusing the Bear Chits indicates:

Its one or more of the following:
1. CA's BBB credit rating really isn't BBB (many have already noted this)
2. The banks are broke
3. The IOU redemption process is too cumbersome.

Requiring a notorized bill of sale is stupid. Its going to cut the price of these warrants on the secondary market by the costs of the bill of sale processing. So what will Rob Dawg's buying price change to? 92% with a $22 fee?

If there is no secondary market, forget retail accepting these IOU's. They're broke as is.

Got Popcorn?
Neil

Somehow I don't look forward to the new reality t.v. show shot live out of CA:

"People Eating People."

no, not at all.

--bh

I just saw that dispicable shill Kudlow on CNBC. He was arguing that even though employment is not going to recover anytime soon, the market should go higher as profits will increase due to the layoffs. No joke. Kudlow must believe companies don't need customers of that debtors don't need income to pay interest and principal.

I can't wait until we automate and outsource ALL the jobs away. The last dude working is going to be making some serious coin.

Repeal of Prop 13 is coming

LOL!

Tim waiting for 2012 (homepage, profile) wrote : Bulls**T. All reagan did was start to borrow from SS. Nothing innovative there.

That's false...LBJ started the raid on Social Security....Reagan continued the practice, as has every president since LBJ. Reagan actually raised payroll taxes substantially as part of a commission brokered by Alan Greenspan. First sign that Greenspan wasn't a true Randian .

Currently base 9.75% and 10.25% in places.

Makes you wonder how the South Gate auto mall will fare with 10.75% sales tax.

Thanks for the link, Scone

"The treasurer's office says it won't redeem the state's IOUs without a notarized bill of sale signed by the payee whose name appears on the note."

If the state sticks to this (which I doubt), the IOU receivers may have the last laugh.
I get an IOU, sell it for 90 cents/$. The buyer can't redeem it, needs a notarized bill of sale. I happily comply, for another 40 cents / $.

And I am tired of the pretense that an event in the Staples Center is some kind of extraordinary expense. I call BS.

LA and California are expected to provide safety and security for the people whether there is an event downtown or not. It's LA, for Pete's sake, there is always an event or two downtown, and the cops get paid whether there is an event or not. A**H***s. Like if the event was canceled, all the cops would split and take the day off, with no pay.

Screw you, coppers, do your stinkin' job and stop whining.

Unless the powers-behind-the-scenes force the banks to treat the IOUs as cash... disaster looms

I think it does anyway. If CA's move has even a hint of success, you have to look for NY, NJ, CN to follow quickly, all with varying durations. Then we're back to colonial currency days.

4 ways to increase government revenue: grow, tax, conquer or print. They're pretending to have a printing press now. I think they should have a Plan B ready that involves conquering and enslaving Oregonians.

OT- This is interesting (to me)
Facebook Revenue to be "Billions" in 5 Years; Twitter Vital for National Security
Mish's Global Economic Trend Analysis: Facebook Revenue to be "Billions" in 5 Years; Twitter Vital for National Security
BTW, finally got my goats home yesterday-
xxxxx

threetorches...

Nicely put...everyone at the table should be watching this hand.

No matter how they choose to handle this, it's going to smell.

@ HG - my pleasure

@ Angry Saver, re: 'the market should go higher as profits will increase due to the layoffs.' What's really sick is, the market does often behave that way, because employees are seen as a 'cost' rather than an 'asset.' Especially in non-retail industries, where the employee is not likely to buy a jet engine or some big ticket thing like that. And a lot of retail has been tossed to Asia anyway. I'm not saying it's morally right, I'm just saying that's the way the pundits and the big market players think-- cold as ice.

Minimum wage in 1990 = $3.80
link 

$7.25 (2009 dollars) = $4.48 (1990 dollars)
- Wolfram|Alpha 

$3.80 (1990 dollars) = $6.16 (2009 dollars)
- Wolfram|Alpha 

• minimum wage is beating inflation? Or is purchasing power decreased? ($6.16 vs. $7.25)

btw,[$15.00 (2009 dollars) = $9.26 (1990 dollars)]
- Wolfram|Alpha 

.......what a joke.........most who live in CA really don't get it.

The most severely affected will be the lower-income people who need the IOU cashed today, not in October of 2000 and whenever. They will grumble about the 64-cents on the dollar they receive from some derelict check-cashing firm to pay for food, booze, electric or their new cardboard-box home. This is just the next act of a sordid play.

• The problem with breaking Prop 13 is that it wouldn't result in more revenue.

• The warrant endorsement process is indeed too cumbersome. My 94.1¢ plus $18 anticipated this. Remember these instruments carry a 3.75% rate. Thus if all goes well I can look at ~11% double tax free annualized returns. That's a fair return for the risk of short term BBB- paper on downgrade watch.

• California is playing another fiscal game of chicken behind the scenes. They just plain old aren't paying the MediCal invoices. They've gone from a routine 90 day float to 120 or greater with some pretty dirty tricks like kicking back entire invoices for missing commas stuff.

• It is still cute the way the other 49 keep acting like they have a choice here.

If you think about it...

What?!?! and stop twittering about Americal Idol on my Iphone while driving my SUV?!?!

California IOUs on ebay and craigslist..

California Sets Terms on IOUs as Questions Arise
California IOU Holders May Turn to Check Cashers - Financials * US * News * Story - CNBC.com

By: Reuters | 07 Jul 2009 | 10:30 AM ET

As California continues to issue "IOUs", more controversy is brewing over their use. On one side, IOU recipients are beginning to trade them like currency, forcing the California state treasurer's office to issue guidelines if they are sold through eBay, Craigslist or other means.

.......California's treasurer is telling recipients of the IOUs that if they sell them to third parties, they will be redeemed by the state treasurer's office only if accompanied by a notarized bill of sale signed by their listed payee. "We are in the process of contacting officials of eBay and Craigslist to post a notice of the policy on their sites," the statement said. Speculation is rising over whether California's tax-exempt IOUs, technically registered warrants, can be bought, sold and traded. The Securities and Exchange Commission must first determine if the IOUs are securities to regulate them, said Ernesto Lanza, general counsel to the Municipal Securities Rulemaking Board, adding that the board was not working directly with the commis—sion on that decision. "It looks like it has all the hallmarks of a security," Lanza told Reuters. "If they are securities, I think they're pretty clearly municipal securities.............

It is still cute the way the other 49 keep acting like they have a choice here.

Now that revenue is scarce, I'm starting to hear the "CA pays more to the Feds than it gets back" argument more and more. With Fitch projecting the deficit growing beyond "non-priority" levels by October (it'll happen by September IMHO), we'll be facing a phased state government shutdown by late August without a federal bailout.

"
Byzantine_Ruins (homepage, profile) wrote on Tue, 7/7/2009 - 11:45 am

Banks applying tightening hand to the testicles of the Federal government."

Don't worry; wait long enough and they just go numb and fall off.

I'm just saying that's the way the pundits and the big market players think-- cold as ice.

Scone,

Cold as ice? Dumb as dirt imo. That's not thinking it's shilling. Stocks are about future revenue streams. Not one time or one year items.

Stocks in the short term are completely irrational. According to some reports, GS accounts for ~ 50% of a days trading volume. In the long run, stocks deliver only what they earn and pay out as dividends. And approximately half of those "earnings" are inflation.

The inflated pay of CEOs since the 1970s has largely been based on the market misCONstruing performance with inflation and stock over-valuation.

BSR-

Read the CA IOU FAQ's above. The link points to who is paid how, and the total amounts.

Essentially all individuals are currently paid in real $. The biggest IOU recipients are state vendors and local governments. Now that latter one could get interesting.

Wouldn't it be interesting if the SEC determines that they are municipal securities as long as they pay interest. Then California says "We wanted to pay you interest but the SEC won't let us." Then you can kiss that Oct 2nd redemption goodbye as there is no incentive for the State to redeem.

Hear me people of California:
Come Oct 1, the state is going to say the IOUs are NOT redeemable.

I'll be here for beers or bearslaps (or some weird combination of both) on Oct 2nd...

You can live in numerous countries(depending on visa requirements) for up to 90 days. You just have to relocate for a few days and return.

" HomeGnome (profile) wrote on Tue, 7/7/2009 - 12:04 pm

X---"BTW, finally got my goats home yesterday-"

Cabrito!

IF I lived in California, I'd make sure I was ready for battle.
When it goes, it is going to go quick!
Esp. with IOUs inside the wire..."

Thankfully, I don't. I live in a bedroom community here in a left-wing state on the right coast.
xxxxx

The inflated pay of CEOs since the 1970s has largely been based on the market misCONstuing performance with inflation and stock over-valuation. - AS

I know that stuff, but it is what it is. I personally don't believe in the 'rational actor' idea at all, and so I don't expect the markets to be a perfect information-processing machine-- ever. To me, it's all about the madness of crowds. But that doesn't mean it can't be understood.

ROME (Reuters) - China, Russia and Brazil will use this week's G8 summit in Italy to push their view that the world needs to start seeking a new global reserve currency as an alternative to the dollar, officials said on Tuesday.

Do you hear that USD?
That is the sound of your death as reserve currency.
It is inevitable...

scone,

Don't get me wrong, a nimble trader or savvy investor can indeed make money. But the notion that the market can deliver everyone 10% L.T. returns against a back drop of 2.5% real growth and 1% or 2% inflation is bogus.

This event is a symptom of a basic dysfunction in society. If parts of it begin to fragment, they will be brought together again, maybe in ways that most of us won't care for.

That said, my own personal reaction is disbelief, incredulity.

Again, see the Pope's encyclical issued today. As analysis it's not completely off-base.

"Selling them to third parties," by the way, just means "exchanging them for something of value." Whether you are selling them on eBay for Federal Reserve Notes, or exchanging them for food down at WallyWorld. Eventually someone has to take on the risk of holding to maturity, and ordinary cash-starved people cannot do that. They must be able to exchange them for goods and services. And everyone must be able to do so on roughly equivalent terms; if people need to fill out paperwork to transfer the darn things (in large amounts of small denominations, no less) the whole program grinds to a smoking halt. Who is going to be checking all of those signatures? No one? Then why require them?

If they are not freely transferable, they will not work as people imagined they would work. They will not "work" at all.

"
HomeGnome (profile) wrote on Tue, 7/7/2009 - 12:22 pm

ROME (Reuters) - China, Russia and Brazil will use this week's G8 summit in Italy to push their view that the world needs to start seeking a new global reserve currency as an alternative to the dollar, officials said on Tuesday.

Do you hear that USD?
That is the sound of your death as reserve currency.
It is inevitable..."

It is inevitable, but it isn't imminent. There's nothing to replace it with. Not the Euro, not the Amero, and certainly not the Ruble or the Yuan.

ucgal (profile) wrote on Tue, 7/7/2009 - 12:15 pm replyIgnore user

As i am most unfamiliar with Cali legislative process, did Reagan raise the taxes or did the cali legislature during his tenure?

"enslave the oregonians"

Isn't half of Oregon made up of pissed off californians anyway?

My father told me that when you get pissed at California you move to oregon.....then you get pissed at Oregon and move to Washington (tax-stradle the Columbia)

Ciao
MS

"Come Oct 1, the state is going to say the IOUs are NOT redeemable."

Avoid Sacramento during that time then. The riots will be fierce.

Cinco "It is inevitable, but it isn't imminent. "
Agreed.
I think the USD has about 5 years left as Reserve Currency before SDRs take over as R.C.

Pavel "It's like saying Washington would refuse aid in the event of an earthquake."
or perhaps a Category 5 Hurricane named Katrina.
"Brownie, you're doing a heck of a job"

Maybe, just maybe, the US Federal Government ISN"T too big to fail.
Epic Fail.

Avoid Sacramento during that time then. The riots will be fierce.

And that's probably just from the REIT-holders. Doesn't CA government lease something like 40% of its office space?

It is inevitable, but it isn't imminent. There's nothing to replace it with. Not the Euro, not the Amero, and certainly not the Ruble or the Yuan.

We are all but begging them to step up and be the reserve currency... "Come on - you can do it... it's great fun... buy all the cheap foreign crap you always wanted & gut all the productive sectors of your economy at the same time. Small price but worth it right? Besides work is for suckas...

Don't ya want travertine, don't you want granite? Come on - you know you do."

I think they should have a Plan B ready that involves conquering and enslaving Oregonians. - MTCRP

They can't do that. Oregon is a wholly owned subsidiary of Intel.

This is correct, which is why Alaska is made up of so many pissed of ex-CA-OR-WA people.

So maybe Sarah's headed to the North Pole... interesting theory.

Palin/ Sanford would be an interesting match, no?

That said, my own personal reaction is disbelief, incredulity.

Pavel, I can't explain exactly why, but I am reminded of a night I sat up watching CNN cover Russian tanks attacking their own parliament building. You can't say exactly what's going to come of it, but things are going to change and not necessarily for the better.

For all you cali haters out there, the state parks are still open and crowded.

" HomeGnome (profile) wrote on Tue, 7/7/2009 - 12:29 pm

Cinco "It is inevitable, but it isn't imminent. "
Agreed.
I think the USD has about 5 years left as Reserve Currency before SDRs take over as R.C."

SDRs; I'd never heard of those before now. Is that a sort of derivative made of currencies? Is there a way they use beyond diversification to limit risk of a currency collapse?
Edumacate me

Cramer is still pushing "early cycle stocks" BWAHAHAHAHA. He's been pushing those for a year and a half now. He's been recommending BDK since $90. It's $26 now.

I imagine it will be $2.60 by the time someone murders him.

@Cinco-X

"It is inevitable, but it isn't imminent. There's nothing to replace it with"
? Did you read the headline? BRIC is pushing to create a new reserve currency.

There are a lot of people on this board who keeps repeating that line "they have to take the dollar...what are they gonna replace it with?" Are they bots sent by the government?

Here ya go: Cinco
Special Drawing Rights - Wikipedia, the free encyclopedia
Russia, China to push global currency at G8 summit
| Reuters

" dryfly (profile) wrote on Tue, 7/7/2009 - 12:30 pm

It is inevitable, but it isn't imminent. There's nothing to replace it with. Not the Euro, not the Amero, and certainly not the Ruble or the Yuan.

We are all but begging them to step up and be the reserve currency... "Come on - you can do it... it's great fun... buy all the cheap foreign crap you always wanted & gut all the productive sectors of your economy at the same time. Small price but worth it right? Besides work is for suckas...

Don't ya want travertine, don't you want granite? Come on - you know you do."."

Who is "them" and why do we we want them to? ...So that we can peg our currency to theirs and gain a competitive advantage, whomever "they" are?

RD,

I'm thinking 1) the Water Authority entities and Municipalities and 2) the Energy Company service contracts for the State of CA.

Water will flow per argreements, but the cost-back mechanism at the municipal level will be interesting to say the least. The energy contracts are substantial and I'd be interested to see how those companies are 'redeeming' IOUs from the state.

--bh

that previously sold for $2.1m and said $1.3-1.5m in a few years was a no brainer.

To be fair, he's correct: You'd have to have no brain to pay $1.3M.

How's that California notgeld working out?

Which side will law enforcement be on when the "money" is no good?

@Fiduciary Doodie
As i am most unfamiliar with Cali legislative process, did Reagan raise the taxes or did the cali legislature during his tenure?

He signed the bills. I was pretty young at the time, so I don't have personal memories of whether he also backed the legislation. But from what I read - he went from proposing tax-cuts, especially to the UC system, to actively pushing for the increases. In his tenure he doubled the Cali budget.

Cali is similar to the fed gov't - the legislature writes the bills - the governor signs or vetos them.

First sign that Greenspan wasn't a true Randian .

meh - no, it was raise taxes on the lower wage earners rather than raise the cap significantly or apply FICA to non-wage income. He was protecting the Galts...

Who is "them" and why do we we want them to? ...So that we can peg our currency to theirs and gain a competitive advantage, whomever "they" are?

They is anyone who wants to step up and be the new reserve target... And as far as pegging? No chance... neither a pegger or pegged be. I'd be happy just getting out of 'their' cross hairs for a while.

So riddle me this y'all...how will the Fed NOT end up adding these Cali-bucks to their current mystery-meatloaf should it come to that? Tuesday it's all tough talk by the banks...by Friday there'll be some kind of agreement that'll result in the banks caving.* Nothing to see here, move on.

*Unless I'm misreading the whole Dem-Rep thing that might be in play between Obama and Ahnold. Would the cabal really try to make Cal Republicans look bad somehow by not forcing the banks to wilt on this?

"...how will the Fed NOT end up adding these Cali-bucks to their current mystery-meatloaf should it come to that?"

Can the US afford to backstop every local political stupidity by every legislature, governor, county board or city council? Of course not... they can only afford to backstop the blunders of their financial buddies, which is what they have done - with OUR money.