Posted by: jhamon | July 11, 2009

Banks to California: We Don’t Want Your Post-Its

Arnold Schwarzenegger

Chief Executive or Chief Bag Holder?

In a further twist of the Great Unwind, banks across the state have reached a consensus about the quality of California’s IOUs: “Just Say No.”  from SF Gate:

California’s fiscal crisis continued unabated Friday with most major banks refusing to cash the state’s IOUs starting today, the state controller delaying $4 billion in payments to public schools, and Gov. Arnold Schwarzenegger and legislative leaders still looking for a compromise to solve the state’s huge deficit.

Despite pressure from the state treasurer, JPMorgan Chase & Co., Bank of America Corp., and Wells Fargo & Co. and other major banks planned to stick to their plans and not honor California’s warrants after Friday. State Treasurer Bill Lockyer announced Citigroup Inc. agreed to a one-week extension through July 17.

Lest those of you not in California think of this as a regional sideshow, the state represents 13% of US GDP and is the 10th largest economy in the world.  A true meltdown will have serious national consequences, and as I wrote yesterday, firing every state employee won’t close is California’s budget gap.  

We’re in the deep end now.

 

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