SACRAMENTO, Calif. – The state’s biggest banks said yesterday they will stop accepting California's IOUs on Friday, giving a foot in the door to more than two dozen credit unions that plan to accept the state warrants indefinitely.
The banks’ ultimatum comes as lawmakers are still unable yesterday to pass a plan to close a $26 billion budget gap, putting increasing pressure on state government.
California began issuing IOUs, called individual registered warrants, to hundreds of thousands of creditors last week. State Controller John Chiang said that without IOUs, California would run out of cash by the end of July.
But now, if California continues to issue the IOUs, creditors will be forced to hold on to them until they mature on Oct. 2, or find other banks or credit unions to honor them. When the IOUs mature, holders will be paid back directly by the state at an annual 3.75% interest rate.
More than two dozen credit unions, including SchoolsFirst FCU, The Golden 1 CU, Travis CU, Yolo FCU, San Francisco FCU, Community First CU, Provident CY, SRI FCU, Kaiperm Diablo FCU, Contra Costa FCU and Chabot FCU, have announced they will accept the IOUs, some them indefinitely.
