Get Yer Souvenir IOUs Today!

Bloomberg reports that people are lining up for those souvenir Arnoldbucks.

Controller Chiang said the warrants can be transferred between individuals, setting up the possibility that a secondary market for the IOUs may develop. Already ads are appearing on Web sites such as Craigslist offering cash for the IOUs at below face value.

In such a transaction, the person who gets the IOU would get most of the cash they were due the state, while the person buying the IOU might then hold onto it until maturity and earn the face value plus the 3.75 percent interest.

At least one person offered to buy an IOU at more than face value as a keepsake.

“I am interested in purchasing a ‘State of California IOU’ as a souvenir,” the ad reads. “I figure it would be an interesting thing to have around when my grandchildren are fighting over my stuff after I’m dead and gone. I will pay two times face value (up to $100, or $50 face value) for a warrant/IOU.”

Of course, after July 10, the deadline that banks like BofA and Wells have given for exchanging these IOUs for cash, souvenirs may be the only value for these IOUs for a few months. Maybe Arnold will go to a baseball card convention and sign them himself!

Here's another FAQ about who receives IOUs and who does not. The unemployed, SSI/SSP recipients, state employees and retirees, IHSS and Medi-Cal providers will NOT receive IOUs. Welfare recipients, contractors with the state, local governments, and income tax refund recipients WILL get them. Felix Salmon made a handy chart that suggest the haves will keep getting paid and the have-nots won't, and that's somewhat true, but some have-nots who have the benefit of their services being partially provided by the Feds will get paid as well. In general, where you stand does depend on where you sit, in this crisis. This again makes clear that the idea of California debtholders, who get priority of payment in the state constitution over everything but education, getting stiffed by the state is a ridiculous one that pretty much cannot happen, and lowering bond ratings should be rightly seen as Wall Street gouging.

And I'll allow Karen Bass to explain exactly who's responsible for this particular outcome of IOUs and lowered bond ratings.

Small businesses, students, seniors, and taxpayers will all start receiving IOUS. This shameful day didn't have to arrive. In fact, Governor Schwarzenegger had several opportunities to prevent it.

On June 12 Governor Schwarzenegger unilaterally blocked the Controller's authority to secure short-term loans to avoid the cash crisis. He said, "let them have a taste of what it is like when the state comes to a shutdown -- grinding halt."

On June 25 after the governor called Senate Republicans to his office for private meetings, $4 billion in immediate cash solutions that had been passed on an overwhelming bipartisan majority in the Assembly were killed in the Senate.

Most recently, the governor vetoed a comprehensive package of budget solutions supported by majorities in both houses of the legislature that would have resolved the $19.5 billion deficit, left a $4.0 billion reserve, avoided the cash crisis and prevented IOUs [...]

We did offer, as a sign of good faith, to begin work immediately on reforms regarding restructuring Medi-Cal and eliminating fraud in the IHSS program. We also committed to working with the governor on other reform legislation for him to sign. But the governor wouldn't take "yes" for an answer. So California businesses, taxpayers and students will be receiving IOUs simply because Governor Schwarzenegger thought it was more important to immediately force last minute changes such as reducing future employee pensions, fingerprinting elderly and disabled Californians who receive services, and denying kids food stamps if their families can't access a computer to sign them up for the program.

See Noreen Evans for more.

The budget gap grows by $25 million a day and we have wasted billions of taxpayer dollars because the Governor wants to teach everyone a lesson. I hope that IOU secondary market is bigger than eBay, because those suffering with the consequences of dysfunction are going to need the help.