CA begins issuing IOUs.....for the Peons.

[Alan Bolte]

Is it technically money if it isn't "legal tender," that is, they aren't legally considered acceptable payment of private debt? It doesn't matter if some banks will accept them, only that the courts won't force them to.

[Pollux]

Maybe northern Cali should dust off those plans for Jefferson.....

Ah, Jefferson - a red state on the Pacific coast. The surrealism would be incredible, and I'd be living in the probable state capital!

In all seriousness, this is definitely very worrisome. As the son of a doctor, I have been able to count myself among the well-off; now, that my mother has recently been fired (for what she believes to be racial and gender discrimination) I can no longer expect this to remain true.

I've been trying not to think about it more than I need to; at any rate, there's very little I could do in my current position. This, of course, will do nothing to help us: it could obviously very well ruin us for a long time.

Kentucky looks better and better everyday...

[/rant]

[Broomstick]

There's no question times are getting tough - I went from very comfortably middle-class to officially poor rather quickly, and it's getting harder and harder to make ends meet for everyone.

Thank god I downsized my lifestyle so quickly, and never did acquire typical levels of consumer debt. And I have a garden to supplement my food budget. And two working vehicles that are paid off. And a few other things going for me. Even so, I've been up late some nights worried about finances.

A lot of people who were middle class or upper middle class just a year or two ago are discovering the hard way that yes, bad things can happen to them and their personal nest eggs weren't as secure as they thought.

When the lay-offs hit there is no question in my mind that the old race, gender, age, religion, and other bias is coming out of the woodwork, and it's also impacting who gets hired. The problem is, as always, proving such things which is why most people don't take discrimination to court.

[TrailerParkJawa]

Things are certainly going to get very rough in the Golden State. However, this isn't the 1st time IOU's were issued and the immediate question will be are banks going to honor them as they did the last time around?

According to this article on CNN Money, quite a few credit unions will accept the IOUs but not that many banks are taking them, and the ones which are accepting them are only doing so through July 10th. Strangely enough, the banks taking IOUs are the ones in the biggest doo-doo (BAC, Citi, JPMC, Wells Fargo) and supposedly too big to fail. Hmmmm...

My credit union is going to accept them. There is no indication from my credit union how long they will take them.

[Elfdart]

Some enterprising state senator trying to score points introduced a bill today that would allow people who have received IOU's to use them to pay any outstanding fees or bills owed to the state. Car registrations, licensing fees, all of that sort of thing. He felt turnabout was fair play.

Not sure if its dickish or not.

I think it's a viciously good idea, but that it's unconstitutional. States are not allowed to make their own paper money.

You mean this isn't legal tender?

[Phantasee]

We saw riots in LA in 1992 over some racism and police brutality. What makes you think the underclass of California, the poor, the blacks, and other minorities who aren't doing so well right now, won't riot? Or is California and LA too different in 2009 to have a repeat of 1992?

[Elfdart]

From my limited understanding of Cali politics, he's being a dick if he supported Prop 13, as the 2/3'rds requirement for tax hikes is the proximate cause of the current impasse.

If I'm wrong, please disregard the above.

It's not just Prop 13, it's the fact that Californians thought they could maintain a California standard of living (for example, the state used to have the best public schools in the country) with a Mississippi budget (Miss. being the state that always comes in last or near last when it comes to standard of living). You tax and spend like Mississippi you end up with poverty, high crime, shitty schools etc just like Mississippi (or Arkansas or Louisiana). Now California has a commons that has been wiped out, huge debts, and not anywhere near as much money as they need to pay bills.

[Hawkwings]

The mountains along the California-Oregon border are really rugged without much way to support large amounts of life, so if millions of refugees start fleeing north, we can probably air-deploy minefields in Siskyou Pass and at a couple of other places and stop the fuckers cold. Long live the Republic of Cascadia!

*crooked grin*

Ahh, chokepoints. I-5 is such a wonderful highway for so many reasons. Along with those minefields and blockades, we need film crews out there! Think of the income from selling the footage!

I suspect not much will get accomplished until the legislators start walking home with IOUs because they haven't figured out a solution and their cars have been destroyed by the mob outside the state legislature.

[The Yosemite Bear]

As I pointed out in my editorial, I didn't have to live in West Virginia or Penn. under the Truck System coal mines to understand being another day older and deeper in Debt. This is my nightmare since I was nine years old come to full fruit for me to reap what others had planted. I have stated personally that were it not for the fines and jail time, and expense I would celebrate Jarvis' Death with wine, and pissing on the old bastard's grave. Fortunatly I can't afford the wine, and security around his grave site got beefed up after some teen vandalized his neighbors some years ago. If we could just disentern him and hang/burn his remains like was done with Cromwell.

[Glocksman]

As I pointed out in my editorial, I didn't have to live in West Virginia or Penn. under the Truck System coal mines to understand being another day older and deeper in Debt. This is my nightmare since I was nine years old come to full fruit for me to reap what others had planted. I have stated personally that were it not for the fines and jail time, and expense I would celebrate Jarvis' Death with wine, and pissing on the old bastard's grave. Fortunatly I can't afford the wine, and security around his grave site got beefed up after some teen vandalized his neighbors some years ago. If we could just disentern him and hang/burn his remains like was done with Cromwell.

Wow..your plan sounds much like the one I'm going to do when my Dad's second wife kicks the bucket.
Though my plan includes pushing the priest aside during the graveside service, saying 'excuse me', unzipping, and pissing on her coffin.

Before anyone asks, yes I hate the woman as she's the one my Dad ran around with while married to my mother.
Though I wonder if my hate would be as strong if she'd died in her fifties while my mother lived to be in her mid seventies.
As it is, mom died in 2000 at age 58 while the bitch is still alive today at 73.

[J]

Things could start becoming interesting after this Friday, as the major banks will no longer accept IOUs.

WSJ link

Big Banks Don't Want California's IOUs
By RYAN KNUTSON

A 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.

Ms. Mills of the CBA said some banks were concerned that there aren't processes in place to accept IOUs, and also worried about fraud issues. She noted that not all banks have set a July 10 deadline, and that dozens of credit unions in the state will keep accepting IOUs.

Wells Fargo's head of community banking, Lisa Stevens, said: "We're very disappointed, as are many Californians, that California has taken the unfortunate step of issuing IOUs in lieu of payments to some businesses and individuals."

State officials said they were disappointed by the banks' decision. Garin Casaleggio, a spokesman for Mr. Chiang, said: "We don't want anybody to suffer who can't redeem them when they need cash."

So after this Friday it's going to become a fair bit harder to convert IOUs into dollar bills. I think a fair number of people may end up being unable to convert their IOUs into cash and end up in deep financial trouble, and the same is also true of small businesses. And if enough people perceive they're holding worthless paper, well, things will get ugly.

[Broomstick]

So after this Friday it's going to become a fair bit harder to convert IOUs into dollar bills. I think a fair number of people may end up being unable to convert their IOUs into cash and end up in deep financial trouble, and the same is also true of small businesses. And if enough people perceive they're holding worthless paper, well, things will get ugly.

While that would certainly suck for California, and I don't want to see that happen, all of a sudden I don't feel so bad about living in Gary, Indiana... (our state did pass a budget and we're still getting paid in money. Not a lot of money, but it's the real stuff at least when we do get it.)

[Surlethe]

Could California pass a law forcing all banks in the state to accept IOUs as legal tender? They'd end up inflating the money supply by $26 bn and face all of the medium-term problems that entails, but it would at least settle the short-term budget problems.

[Beowulf]

Could California pass a law forcing all banks in the state to accept IOUs as legal tender? They'd end up inflating the money supply by $26 bn and face all of the medium-term problems that entails, but it would at least settle the short-term budget problems.

Nope. That'd be CA printing money, which is a power reserved for the US government.

[Broomstick]

No - that would essentially make the IOU's currency, and only the Federal government has that authority.

[Surlethe]

Is there legal history on that beyond the Constitution? I just checked, and it said Congress had the authority to coin and regulate currency, but that power is not explicitly restricted from the states.

[Broomstick]

Pre Civil War I think there used to be state-issued currency but post Civil War that changed. Part of "regulate" would be deciding who can and can't print/coin money. At present, only the Feds can do that.

[The Yosemite Bear]

Ironically CA helped the union somewhat during the Civil War, because our coin was baked up by real gold from the CA gold fields, whilst neither the confed or union dollar were. Oh and CA sided with the Union.

[J]

And now for some theatre of the absurd.

CBS13 link

Jul 7, 2009 10:05 pm US/Pacific
Budget Battle Devolves Into Food Fight

SACRAMENTO (CBS13) ― Seven days after the new fiscal year began, the state of California still appears to be far from a budget solution.

Disabled protesters, angry over cuts to vital services, were arrested outside the Capitol on Tuesday; inside, lawmakers bickered about fruits and juices.

A war of words developed between Governor Arnold Schwarzenegger and lawmakers over the fruit-related focus of three new bills.

"The governor is not against condiments. The governor's not against fruits of any kind," said spokesman Aaron McLear. "But he believes we ought to be focused on solving our budget crisis first and foremost."

Assembly bill 606 creates a commission to serve the marketing interests of the blueberry industry. Another bill defines "honey" to mean the natural food product resulting from the harvest of nectar by honey bees, and a third bill adopts regulations establishing definitions and standards for 100-percent pomegranate juice.

"Look, we're pro-condiment, we're pro-fruit, but the focus needs to be on the budget crisis," McLear said.

Senate Majority Leader Dean Florez (D-Fresno) called Governor Schwarzenegger's criticism "childish" and said he is fed up.

"The governor's turned from an action hero into just another politician," Senator Florez said. "He should really, really take a course on fundamental government on how the legislature works."

"The fact that he doesn't understand these things worries me," he added.

McLear shrugged off the criticism. "If others in the building want to level personal attacks, that's certainly their prerogative."

While the rhetoric escalated inside, at least a dozen protesters in wheelchairs were arrested for physically blocking the entrance to Governor Schwarzenegger's officer to protest his proposed cuts to healthcare.

The protesters were cited and released at the scene.

Governor Schwarzenegger said he plans to invite Assembly Speaker Karen Bass back to the bargaining table, but the Speaker's office said no call had come by Tuesday night.

Bass boycotted the meeting of the "big 5" lawmakers because she says the governor is demanding reforms instead of focusing on the budget deficit.

So let me get this straight. There's a budget crisis in progress and the state is issuing IOUs in a last ditch bid to close the hole in its budget and remain solvent for a few more months, and instead of working round the clock to fix the budget deficit the legislature is debating bills on fruits & honey. Are you kidding me? Jesus, no wonder the state is FUBAR.

[The Yosemite Bear]

OH PLEASE we will just pass another bond issue to fill in the gap the way we always do. I think the current CA bond issue wank thing means that paper issued as a promisary by the state of CA is about as functional as toilet paper....

[Garibaldi]

It's a little hard to feel sympathy for the California voters who even earlier this year rejected 4 ballot measures specifically designed to mend the budget holes. I recognize that the state legislature is utterly fucked but this whole situation could have been avoided if the electorate didn't display a total idiot lack of foresight unparalleled in states not ending with "ississipi".

[LaCroix]

I am so reminded of the discussion on Voyager about cracks in event horizons when the only guy intelligent enough to mention "shouldn't we be talking about the budget instead of what exactly defines honey" is being shouted at for being stupid and not to know how gouvernment works.

And it is double sad when Arnold is that lone voice of logic.

If Cal. gouvernment thinks that honey definition is more important than paying your bills, you know that there is time to toss all those guys out on their butts.

[The Yosemite Bear]

We have a term limit rule in place so that all those guys are afraid to piss off their masters.

[J]

Bloomberg video link

Summary: Less than 20% of banks still accepting IOUs, though most credit unions continue to do so.
- FedGov refusing to bailout state, so far.
- Some banks thinking of creditlines & alternative methods for people who can't cash IOUs.
- Legislature still can't find its ass with both hands.

[MKSheppard]

It's a little hard to feel sympathy for the California voters who even earlier this year rejected 4 ballot measures specifically designed to mend the budget holes.

Um. California had apparently a $26.3 billion budget shortfall in '09.

The Four measures were:

--Raising taxes which would have generated $16 billion (Prop 1A)

--Modifying Proposition 98 from '98, allowing the government to raid education funds to close budget gap (Prop 1B)

--Sell rights to future lottery proceeds as a way of raising some cash now for state budget. (Prop 1C)

--Modifying Prop 10 from '98 to allow them to raid anti-smoking programs aimed at children funded by a 50 cent tax on cigarette packs. (Proposition 1D) - Generating $750m

--Allowing them to raid the Mental Health Services act; which puts 1% taxes on incomes over $1 million to fund mental health programs (Prop 1E) - Generating $750m

I'm seeing no way that either of them can close the budget shortfall unless you absolutely raid the education funds (Prop 98 is the one that locks in education funding as 40%); and generate an unrealistically awesome future lottery proceedings sale.

And serious cuts in needless "Feel-good" programs, like the CA Solar Initative, which costs like $2.8 billion a year; are not really contemplated -- instead, the Governator tries scare tactics of "Wooo, I'll cut funding for prisons and let everyone out onto the street unless you vote for tax hikes and letting me raid just about everything for the general fund!"

Even in ultra-liberal Maryland, feel-good programs, like MD-Funded stem cell research; got put on the cutting block, to tighten up a $300~ million shortfall -- I know at one point our legislature approved an 80% cut in funding for the MD Stem cell program -- from $23 million to $5 million. I don't know if that cut survived the budget process; but it does show how the mindset over here in MD is different than in CA.