Bloomberg reports:
July 2 (Bloomberg) — California will pay an interest rate of 3.75 percent on IOUs it will begin using today to pay its bills, a panel decided, as Governor Arnold Schwarzenegger and lawmakers remain deadlocked over how to fix a $26 billion budget deficit.
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Thousands of businesses and individuals will now get issued a note promising to be paid by October for everything from tax refunds to services and goods. California, a state with the eighth-largest economy in the world, was forced to issue the IOUs after Schwarzenegger and lawmakers failed to produce an agreement before the state’s fiscal year began yesterday.
Bank of America has already agreed to accept the notes, through July 10. Wells Fargo will as well, albeit reluctantly and with great disappointment, according to a statement by Lisa Stevens, head of community banking for the firm in California.
We’re very disappointed, as are many Californians, that California has taken the unfortunate step of issuing IOUs in lieu of its payments to some businesses and individuals
Wells Fargo has a long history of taking extraordinary measures to help our customers and will accept registered warrants from our customers, but only for a limited time, to allow them time to make other arrangements. We are reluctant to take this step, but are doing so to help our customers who are not at fault and with the expectation that the Legislature and Governor will complete the budget within days. We join all Californians in urging our Legislature and our Governor to take the appropriate steps as soon as possible to resolve this budget crisis.
And as pointed out in the comments on an earlier post, so will to Pan American Bank, which serves the Latino community in Los Angeles and Santa Ana.
Related links:
Fiscal emergency declared in California - FT Alphaville
