SEC to call for Calif. IOUs treated as securities

[Newsjock]

Source: Associated Press

The recipients of billions of dollars in IOUs being issued by California soon may have a regulated market where they could sell them.

Some of the nation's largest banks say that, starting Friday, they will no longer accept the IOUs. The banks want to pressure the state to end its budget impasse, but their action could leave many businesses and families with fewer options for getting their money.

The Securities and Exchange Commission is going to recommend that the IOUs, which carry an annual interest rate of 3.75 percent, be regulated by the Municipal Securities Rulemaking Board as a form of municipal debt. The guidance could come as soon as Thursday, according to two people familiar with the matter who spoke on condition of anonymity because the SEC hasn't yet acted.

... A regulated market for the IOUs "makes it even more advantageous" for individuals holding them, who could sell them at a fair price, said (Paul Maco, an attorney at Vinson & Elkins in Washington who was a director of the SEC's Office of Municipal Securities). The price they receive may be discounted in accordance with the market's perception of the risk of the state repaying the notes, but it would be an orderly market price, he said.

Read more: http://www.google.com/hostednews/ap/article/ALeqM5jHe_YR8ihWWjIRmFF1rKPYBkrTXQD99B3F280pos=4&asset=&ccode=

[Indydem]

1. Great, so the SEC gives California a blank check, essentially...

Considering borrowing was voted down by the voters in the referendums, these IOUs are a violation of that referendum.. but hey, you know... who gives a shit about what the people want.

[Sen. Walter Sobchak]

2. the only place people will be buying these is eBay

something of a novelty, sort of like the trillion dollar Zimbabwean banknotes.

[DCKit]

3. Time to stop buying those "Grab Bag" offers in the back of comic books folks. n/t

[KamaAina]

4. I had an inkling of something like this yesterday

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3959879&mesg_id=3959982

:scared:

this way sounds (marginally) better.

[bemildred]

5. Heck, maybe we could even have "structured financial instruments" based on these things.

Start another bubble or something. Do some speculation.

[Somawas]

6. Time to spend your Confederate money, boys! eom

[mikeytherat]

7. Lisa Simpson: This money is from the Montana Militia. It isn't real!

Homer: It will be soon.

mikey_the_rat

[Javaman]

8. To quote the great Billy Preston: nothing from nothing leaves nothing. nt

[Javaman]

9. at least the SEC is now upfront about the use of play money.

Does this mean I can pay for all my stuff using IOU's?

[izquierdista]

10. All right bad-mouthers

Would you rather have the California IOUs or bonds and commercial paper from GM, Chrysler, AIG, Bear Stearns, Citibank, or any of the home builders that are looking to file Chapter 11?

[radhika]

11. Make them into Wallpaper or Toilet Paper

Actually, I do mixed media art - maybe they could be shredded into something I could sell.

[bananas]

12. Local currency is becoming more common

California IOU's are the latest in the trend.
http://www.treehugger.com/files/2009/01/print-your-own-money-build-community.php