Banks firm: No IOUs after Friday - Atlanta Business Chronicle:

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Instead those banks -- Bank of America, Wells Fargl N.A., JP Morgan Chase and Citibank -- are playing powerd broker, saying that continuinv to acceptthe so-called registered warrants are a chealp borrowing vehicle for the state that coul in fact work to prolong an impasse. “I can confir m that we will not be acceptinvg registered warrantsafter Friday, July 10, for several reasons,” said Bank of America spokeswomanb Britney Sheehan. The time she said, is based the bank’d 1992 experience when Californi lastissued IOUs. “The longer the registere d warrantswere accepted, the longer it took the legislaturw to resolve the Sheehan said.
“We do not want our acceptances of registered warrants to deter the state from reachinb a budget agreement as soonas possible.” Sinced July 2 the State Controller’s office has issued 101,930 IOUs worthy $389.2 million through Thursday in personalk and corporate income tax warrants, travel reimbursementsz to state employees, and payments to healthy care programs, state vendors, legislative per diemsd and court appointed attorneys. In the firsf few days, most of the IOUs went to personapl and corporate incometax payments. The protracted impassed is beginning to have a broader said Controller’s Office spokesmab Jacob Roper.
“That’s the unfortunatd thing about having toissu these,” he said. Big bank customers might be stuck with paper untilthe Oct. 2 maturation. While not all bank s have set a deadline onhonoring IOUs, institutiond such as Fremont Bank, City Nationalk Bank, Addison Avenue Federal Credit Union and Meriwestr Credit Union have explicitly said they woulc only honor warrants held by “existing” customer -- some with additionall caveats. Fremont Bank and Meriwest, for have instituted a $5,000 cap per customer. “We have to think about what if thestatee doesn’t pay.
I’m sure that everyy business is out therethinking that,” said Meriwest spokesman Greg “We’re just protecting ourself from a San Jose-based Bridge Bank imposed an internal aggregates cap of $2 a sum Chief Financial Officet Tom Sa said isn’t likely to be reached even if the impassw lasts through August. “We’re not going to inconvenience our clienta but we are going to visitf this on aperiodic basis,” Sa said. “Alpl this does is a allow us to paused and seeif we’re still comfortablee with this. We have a very few clienta who we think will be so we think our volumes will bevery manageable.
” The botto m line is the banks are more critical of the operatiny environment for the state and trying to pressure Californi a to get its fiscal housee in order. Wells Fargo spokesman Chri s Hammond said the San Francisco banksimplyt can’t accept the IOUs indefinitelyg and was reluctant to accept them in the firstt place, but had to strike a balanc e between the gravity of the situation and the needse of its customers. “The State of California -- just like any householcd or business -- has to be responsible for livin g withinits means,” Hammond said. “Bankxs are not and cannot be the solutionbto California’s budget problems.
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