California's creditors look to options for IOUs
SACRAMENTO, Calif. — Thousands of vendors who do billions of dollars of business with the state of California are scrambling as major banks say they will no longer honor the state's IOUs.
Despite pressure from the state treasurer, JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co. and Citigroup Inc. and other major banks planned to stick to their plans and not honor California's warrants after Friday.
The bankers are trying to pressure legislators into closing the state's $26.3 billion budget shortfall, though there have been few signs of progress.
Some businesses say they may find it difficult to survive or hold onto their employees if they can't find a way to redeem their IOUs quickly.
Until there is a budget agreement, many state contractors including an industrial supply warehouse south of Sacramento and group homes for the developmentally disabled in San Diego are hoping bank loans will see them through.
Gloria Freeman isn't counting on her bank, giant Bank of America, and is approaching other lenders.
Freeman is president of Staff USA Inc., a Rocklin-based temporary-employment agency that has provided medical professionals to state prisons, rehabilitation and mental health departments for 30 years. She said 80 percent of her business comes from the state.
She laid off five of her 55 employees June 26, when she heard the state was planning to send her hundreds of thousands of dollars worth of IOUs that she can't cash.
"Every time they have a budget impasse, they don't pay the vendors for six or seven months," Freeman said. "I'm trying to do everything I can do just to get through it."
Freeman plans to sell her IOUs through a second business she owns, Auction Ten. The notes have a 3.75 percent interest rate and can be redeemed Oct. 2.
"There were a surprising number of people interested in buying the IOUs. Probably a dozen or so, talking from 10 cents to like 90 cents on the dollar," she said. "The banks were saying they weren't going to take them. Now it turns out there are other people who are interested in taking them."
Produce distributor Christian Bartels of Ceres has built a 10-year relationship with Bank of Stockton. He's counting on the regional lender to honor the IOUs or give him a loan to see him through the state's cash shortage.
"If it was a perfect storm and they just cut me off, then I wouldn't last very long," said Bartels. "I've been in talking with them fairly frequently and they've got my back so far. If I was with one of the big banks I'd be scared right now."
Recent comments
idea, Warren Buffet can afford to bail out California and he can...
Just an... | July 10, 2009 at 7:55 p.m.
- Flight cut? What to do 4:25 p.m.
- Hotel creates the 'Twilight' mood 4:25 p.m.
- Beauty of autumn in southern Utah 4:25 p.m.
- Away in a manger 4:24 p.m.
- Art canvas 4:24 p.m.
- Utah gallery listings 4:24 p.m.
- Art Center gets new director 4:24 p.m.
- Berlin Wall art stirs L.A. dispute 4:24 p.m.
- Stockings are sought for exhibit 4:24 p.m.
- Literary footnotes 4:24 p.m.
- Report details Prop 8 aftermath
410 - Gay advocates trek to LDS office
202 - Dirk does dirty work in Dallas
190 - Letters: Care not a right
187 - Lobo suspended
169 - Speed has never been BYU's game
136 - Jazz stumble in fourth quarter
106 - RSL rallies to advance
102 - Prep football: San Juan vs. S. Sevier
100 - Thousands protest health bill
98
re: Mike at 3:36 p.m. Thanks for proving my point.
Well no kidding you have athletes on your team. When your program recruits...
To Re: socal Gal 3:45 p.m., It's not a fact that our pioneer hand-cart...
Folks, I've lived here nine months and all I wanna say is this. I thought us...
Looks like the Griffins haven't missed a beat from last season. Nice win,...
e.g. the federal tax code, 1000 page"stimulus" bills, and 1500 page "health...
@ @Hypocrisy - Thank You... for probably the best laugh I'll have all day....
Sounds like another Utah County scam by some devout conservatives.
More important is to limit super captilism and corrupt wall street and...
I don't know Mr. Strate, BUT, under our Constitution he is INNOCENT until...

