Big Banks Stop Cashing California IOUs
July 13th, 2009Via: CNN:
Residents have fewer places to cash in IOUs after large banks stop redeeming them. SEC warns potential buyers and sellers of possible scams.
Californians have fewer places to redeem IOUs issued by the cash-strapped state.
At least three major banks, Wells Fargo, JPMorgan Chase and Bank of America, stopped accepting the IOUs after Friday.
More than 60 credit unions, however, continue to accept the paper.
State Controller John Chiang started issuing the IOUs on July 2 to conserve cash, while lawmakers and Gov. Arnold Schwarzenegger tussle over closing a $26 billion budget gap. Friday also marked the start of a mandatory third furlough day for most state employees.
The state, the world’s eighth largest economy, has issued more than 90,000 IOUs worth nearly $355 million. Also called registered warrants, the IOUs pay an interest rate of 3.75% and can be redeemed on Oct. 2 or earlier if divided state officials reach a budget deal.
Recipients will include state contractors, social service agencies and those owed income tax refunds.
