Banks set deadline for California's IOUs

SACRAMENTO, July 10 (UPI) -- Several major U.S. banks said Friday would be the last day they would honor IOUs issued by the state of California.

The Golden State, mired in a budget crisis, has been issuing interest bearing registered warrants known as IOUs to taxpayers and local governments in lieu of checks. Last week, the state mailed out 91,000 warrants worth $354 million worth, The Los Angeles Times reported.

But Bank of America, Wells Fargo & Co., and other financial institutions said they were no longer willing to accept the IOUs, which carry a 3.75 percent annual interest rate and mature on Oct. 2.

Wells Fargo spokeswoman Mary Trigg said the bank was "pretty reluctant to accept the warrants in the first place."

Bank of America spokeswoman Britney Sheehan said, "we agreed to help customers and clients on an immediate basis, but it doesn't provide an incentive for the state to reach an agreement if we just accept the IOUs through perpetuity."

Some banks said they would honor the IOUs, perhaps as "an opportunity to differentiate themselves and open their doors to more customers," Henry Kertman, a spokesman for the California Credit Union League said.

About 60 credit unions said they would continue to accept the IOUs, the Times said.