Big Banks Refuse California IOUs

After indicating they would accept California's IOUs from their customers, big national banks are breaking their promise and will stop accepting them on Friday.

Big Banks Don't Want California's IOUs (7/7/09 Wall Street Journal)

"A group of the biggest U.S. banks said they would stop accepting California's IOUs on Friday, adding pressure on the state to close its $26.3 billion annual budget gap.

"The group of banks included Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and J.P. Morgan Chase & Co., among others. The banks had previously committed to accepting state IOUs as payment. California plans to issue more than $3 billion of IOUs in July."

The article did say not all banks will stop accepting IOUs on Friday; some credit unions will still accept them.

So the IOUs from the 10th largest economy in the world is not good enough for the national bankers, some of whom have to bid every single week on the U.S. federal government's IOUs (Treasuries).

Or are the national banks, particularly those deep in TARP money, taking orders from the Fed and Treasury? Maybe the president wants to run California, along with GM, Chrysler, AIG and health care.

The stock market is sinking anew in the last half hour of trading. Dow Jones Industrial is down 145 (-1.75%) to 8179, S&P 500 down 15 (-1.76) to 882, Nasdaq is down 36 (-2.05%) to 1750.

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