The interest rate has been set and the printing presses are warming up, bringing the painful reality of receiving an IOU in California one step closer.
The interest rate will be 3.75% and the maturity date will be Oct. 2, one day later than the controller had initially planned, according to news agencies. Reuters reports that the state will print 28,742 IOUs worth $53.3 million to be sent to those owed a tax refund.
Wells Fargo and Bank of America have said they would accept the IOUs from customers between now and July 10, which won’t help those who get the slips of paper after that should the budget stalemate drags on.
Bankers are reluctant to prolong the drama, and accepting the warrants could take the heat off lawmakers to solve the budget mess. They also seem reluctant to increase their exposure to California, whose credit rating ranks at the bottom of the 50 states.
California Bankers Association CEO Rod Brown in a press release, which can be found here, also complains that the industry still has concerns about possible fraud and other procedural issues, as well as the possibility that California could still be cash poor after the Oct. 2 deadline.
And here’s the money quote:
In evaluating potential registered warrant acceptance, banks have been advised by regulatory authorities to consider such issues as credit quality, capital requirements and concentration limits. Given the poor credit rating of California – the worst in the nation – banks may be hesitant to extend credit to the state.
The heat is on.
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2 comments so far
are you kidding me? we are paying 18 and 20 per cent interest on credit cards with balances only in the thousands and california is in the hole millions and they are only charged 3.75 per cent on these IOU’s? this is madness..and also the chances are the people who will receive their IOUs after the july 10th date when bank of america and wells fargo wont honor them anymore..are the people who are going to need it most i.e. the poor the small business owners and the elderly…while im sure big business and the wealthy will come first…thanks governator you sure do know how to terminate and economy.
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