Posted on 07/02/2009 4:51:15 PM PDT by SeekAndFind
Facing a budgetary crisis of its own making, California has begun to issue IOUs instead of cash payments to at least some of its creditors. For the first time since 1992, the state government has too little cash to meet its obligations. However, Governor Arnold Schwarzenegger insisted that the state was “responsible” enough for banks to accept the IOUs at face value:
California’s controller will start paying many of the state’s bills with promissory notes as soon as Thursday after lawmakers failed to close the state’s worsening budget deficit, adding a new measure of indignity to a state sinking deeper into dysfunction. …
State Controller John Chiang said his office is prepared to issue promissory notes totaling $3.3 billion in July.
It will be the first time since 1992 that California will have issued promissory notes. The move is almost certain to further damage state’s credit rating, already the lowest of any of the 50 U.S. states, saddling taxpayers with billions of dollars in higher interest payments on bonds that have yet to be sold.
Issuing the promissory notes — formally referred to as individual registered warrants — also will have real-world consequences for those on the receiving end. Small businesses that rely on state contracts will be most affected. …
Bank of America announced Wednesday it would cash the state’s promissory notes for its customers through July 10, bank spokeswoman Colleen Haggerty said. Schwarzenegger and state officials asked other banks to do the same, noting that California has never defaulted.
“We will make those payments,” he said. “We are responsible.”
If they were responsible, they wouldn’t have to issue IOUs now. The state government has been a model of irresponsibility for the past couple of years as this utterly predictable budget crisis approached.
(Excerpt) Read more at hotair.com ...
A Kalifornia IOU and a quarter will get you a cup of coffee.
Arnold is just too funny.
“We will make those payments,” he said. “We are responsible.”
If “WE” were responsible this state wouldn’t be in the crapper!
Your chart of who get cash and who gets IOUs is very troubling. Thanks.
I notice that Bank of America “took the lead” in saying they would accept these IOUs. I wonder if there is any relationship of this willingness to their decision two or three years ago to grant credit cards to people who are illegals and had no way to prove income, etc...
We let the commies and leftists take over education and teach last two generations of youth. Friedman in the introduction to “The Road to Serfdom” says the WWII generation came home very knowledgeable about the perils of totalitarianism having fought it during the war. That generation with that personal experience is passing on. Today’s generations do not know of the threat posed by tyrants — it would be an abstract concern taught to them by schools, if only the teachers believed tyranny was a threat.
The chart is from the source article.
Everyone needs a good laugh in the morning.
ML/NJ
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