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Tuesday, July 7, 2009

California: IOUs Blues

California "IOU" recipients can turn to credit unions and check-cashing storefronts if a state budget deal does not appear by Friday and if three major banks refuse to accepting the notes beyond Friday as planned, analysts said on Tuesday.

The willingness of the smaller institutions to take IOUs from the cash-strapped state should also stop the development of a secondary market for trading them, although individuals could end up paying hefty fees to get their hands on cash.

The state government of California, the world's eighth largest economy, is experiencing a severe revenue slump brought on by recession, rising unemployment and the lengthy housing downturn, forcing it to issue IOUs in lieu of some payments.

link: California IOU holders may turn to check cashers | U.S. | Reuters


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