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To: SampleMan
So the IOUs are really 0% bonds?

The IOU's pay 3.75% (annual rate), supposedly tax-exempt. Perhaps that is why some banks are honoring deposits of IOU's -- for in addition to retaining customers, matching the other banks' policies, and not raising the ire of the state government, maybe the banks hope to collect the higher interest rate? If eventually the IOU's bounce, the banks can always take the money back from the customers and possibly charge them NSF/bounced-check fees.

But, unless you're a bank, bonds are better investments, unless one can get a good discount off the face value of the IOU's. Bonds are paid before these IOU's, and given CA's declining credit rating, the bond yields may even be higher.

40 posted on 07/12/2009 6:36:09 PM PDT by heleny
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To: heleny
Bonds are paid before these IOU's, and given CA's declining credit rating, the bond yields may even be higher.

Hold on there. The new rules of bankruptcy under Obama now place bond holders at the back of the line behind unions, newly force-issued government owned stocks, and ACORN.

I don't put it past the state or federal government to arbitrarily decide that those honoring the new socialist IOUs deserve more than the old capitalist bond holders.

But thanks for the info on the IOU's interest status.

43 posted on 07/13/2009 3:37:18 AM PDT by SampleMan (Socialism enslaves you & kills your soul.)
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