SEC Destroys California

The Market Ticker ^ | 7.10.09 | Karl Denninger

[rvoitier]

Well now they've gone and done it:

"The staff of the SEC has expressed its belief that California's recently issued IOUs are 'securities' under federal securities law. As such, holders of these IOUs and those who may purchase them are protected by the provisions of the federal securities laws that prohibit fraud in the purchase or sale of securities," the agency said.

That was a mistake.

Here's why.

[Nuc1]

They won’t cower and submit. They’ll rally for Aztlan. Ya ready to take on 10,000,000 CA residents declaring state independence?

Yes before they are 20,000,000.

[LonePalm]

Cool!

Garde la Foi, mes amis! Nous nous sommes les sauveurs de la République! Maintenant et Toujours!
(Keep the Faith, my friends! We are the saviors of the Republic! Now and Forever!)
LonePalm, le Républicain du verre cassé (The Broken Glass Republican)

[gunnut]

I wonder if a company that does business with the state can send in their IOUs when their taxes are due. I don’t know how California does it but withholding and sales tax are usually submitted in most states at least quarterly. So if a business owes $50,000 in taxes and have an IOU for service render for $25,000 could they send in tyhe IOU + a check for $25,000?

Somehow I bet CA won’t accept their own IOUs as payment.

[learner]

If you accept the IOU’s, then it is income taxable by the Feds.
How are you going to be able to pay federal taxes with an IOU?

If they are securities and go unpaid then you could apply to the SIPC for a claim of up to $500,000. That would leave the taxpayers (federal) stuck with California’s bills.

[mvpel]

CA has declared that selling their IOUs requires notarization of approved transfer from the original payee...

How convenient, then, that the Democrats passed a law a few years ago that devastated the availability of notaries public by imposing ridiculous training, exam, and continuing education requirements upon notaries. The "handbook" is over 50 pages long, but the maximum fee is $10, the same as it is in New Hampshire which only requires an application fee, oath, and a criminal background check.

I know people who'd been trying to adopt children while living in California, and at least one was eventually forced to give up due to the ridiculous expense and hassle of getting a document notarized, let alone an apostille from Sacramento as required for international court proceedings.

[ctdonath2]

Oh, that’s funny.

In lieu of payment, issue IOUs which...
- return paltry interest
- are high-risk for non-payment on maturity
- are not legal tender for payment of any debts public or private
- cannot be transferred without notarization
- notaries are practically non-existent

Popcorn, anyone?

Awright, it’s all but official: CA is done. Now, what is the outcome of the 6th largest economy in the world, and major food producer for the USA (anyone got the %?), going outright bankrupt?

“I’m dead, I just haven’t stopped moving yet.” - Zaphod

[Costumed Vigilante]

Ya ready to take on 10,000,000 CA residents declaring state independence?

"You can't just arbitrarily deport millions of illegal aliens"

"Wrong"

"Yeah, watch us"

[ctdonath2]

While spectacular, things didn’t turn out particularly well for those two.

[Mat_Helm]

[2001convSVT]

You are so RIGHT. The debit burden will crush us all, even the fiscally sound states.

[BBell]

CooL!

[thesearethetimes...]

Lol! Good to know I am not the only one with a brain that jumps there first ; }

Tatt
(GoGators!)

[Costumed Vigilante]

While spectacular, things didn’t turn out particularly well for those two.

They died doing what they loved best: Deporting aliens back to the hell holes they came from.

[ctdonath2]

Be my guest. Not exactly high on my personal list of life-fullfilling goals.

[BBell]

Go Tigers!

[John Jorsett]

The SEC did not destroy California. California committed suicide.

I'd describe it as California climbing out on the bridge and the SEC becoming impatient at the traffic tie-up and pushing it off.