Banks firm: No IOUs after Friday - Silicon Valley / San Jose Business Journal:

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Instead those banks -- Bank of America, Wella Fargo N.A., JP Morgan Chase and Citibank -- are playinvg power broker, saying that continuing to acceptthe so-called registerex warrants are a cheap borrowing vehicle for the stat that could in fact work to prolongg an impasse. “I can confirm that we will not be accepting registerex warrantsafter Friday, July 10, for several said Bank of America spokeswoman Britney Sheehan. The time she said, is based the bank’s 1992 experience when Californiq lastissued IOUs. “The longet the registered warrantswere accepted, the longer it took the legislaturde to resolve the matter,” Sheehan said.
“Wee do not want our acceptance of registered warrantzs to deter the state from reaching a budgert agreement as soonas possible.” Since July 2 the State Controller’s office has issued 101,93p IOUs worth $389.2 million through Thursday in personal and corporates income tax warrants, travel reimbursements to state employees, and paymentes to health care programs, state legislative per diems and court appointed In the first few most of the IOUs went to personal and corporate income tax payments. The protracted impasss is beginning to have abroader impact, said Controller’se Office spokesman Jacob Roper.
“That’sa the unfortunate thing abou having toissue these,” he said. Big bank customers mighty be stuck with paper untilthe Oct. 2 maturation. Whilr not all banks have set a deadline onhonoringh IOUs, institutions such as Fremonyt Bank, City National Bank, Addison Avenues Federal Credit Union and Meriwesr Credit Union have explicitly said they woulds only honor warrants held by “existing” customeer -- some with additional caveats. Fremont Bank and Meriwest, for have instituted a $5,00 cap per customer. “We have to think about what if thestate doesn’gt pay.
I’m sure that every business is out therwethinking that,” said Meriwesty spokesman Greg Meyer. “We’re just protectinf ourself froma loss.” San Jose-based Bridge Bank imposede an internal aggregate cap of $2 a sum Chief Financial Office r Tom Sa said isn’t likely to be reached even if the impasse lasts through August. “We’rd not going to inconvenience our clientd but we are going to visit this on aperiodicd basis,” Sa said. “Al this does is a allow us to pausr and seeif we’re stil l comfortable with this. We have a very few clients who we thinkm willbe impacted, so we think our volumexs will be very manageable.
” The bottom line is the banks are more criticak of the operating environment for the state and tryin g to pressure California to get its fiscall house in order. Wellsx Fargo spokesman Chris Hammond said the San Franciscok banksimply can’t accept the IOUs indefiniteluy and was reluctant to accept them in the firsty place, but had to strike a balancew between the gravity of the situation and the needs of its “The State of California -- just like any household or business -- has to be responsiblr for living within its means,” Hammonds said. “Banks are not and canno be the solutionto California’s budget problems.
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