California's banks are unlikely to change their decision to stop accepting the state's IOUs after Friday, the head of the state's banking association said. Speaking Wednesday in an interview with Fox Business Network, California Bankers Association President and CEO Rodney Brown said,
"It's my sense … that they are probably fairly firm in their resolve."
Brown said that in 1992, when the banks also accepted IOUs, the warrants were accommodated for anywhere from 30 to 35 days, and pointed out the state's budget issues were resolved shortly after banks stopped accepting them.
He said banks want to be good corporate citizens but "don't want to be facilitators for the lack of resolution" on the state budget.
"I think … the banks are saying this is a short-term accommodation and, governor, legislature, get on with the business of resolving this, and we don't want to facilitate it beyond the 10 days."
Separately, the federal bank agencies Wednesday said banks can apply a 20% risk weight to warrants received from the state, which may encourage them to accept the IOUs.
The 20% weight is typical for government obligations, but lower than other types of instruments.