Jul 20, 2009
“The state of California – just like any household or business – has to be responsible for living within its means. Banks are not and cannot be the solution to California’s budget problems.”
This is how a Wells Fargo spokesman explained why his bank would no longer accept California IOUs.
Yes, Wells Fargo! A bank that has received about 25 billion dollars – an amount nearly equal to California’s alleged budget deficit – from the federal government to solve its own “budget problems.”
But Wells Fargo is not alone. Bank of America, which so far has gotten 55 billion from the federal government, and Chase, which got 25 billion, are among the banks that are not accepting IOUs. Citibank, recipient of 50 billion dollars, said it would accept them only until July 17.
Hypocrites? Yes. But why are the big banks rejecting IOUs? Buying them can be very lucrative, since these IOUs carry a 3.75% annual interest, tax-free.
Given these banks’ record, it’s probably because these vultures are eyeing even bigger profits in the long run. By discrediting the IUOs, banks gave credit rating firms an excuse to push California’s credit rating even lower than it was. And that, in turn, will allow banks to charge California an even higher interest rate for loans – which state governments always depend on for cash.
This whole IOU business sure looks like another scheme for big financial interests to rip off the population