Citibank and Bank of the West agreed Friday to honor state officials’ requests that they continue accepting California IOUs, as most other banks refused.
With the state Legislature still embroiled in a fight over how to close a $26-billion budget deficit, the California government is expected to issue nearly $3 billion worth of interest-bearing IOUs this month.
Starting today, major banks such as Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co. and Union Bank of California will stop accepting the IOUs, also called registered warrants. Hoping to pressure the state to settle on a budget, the banks rejected state Treasurer Bill Lockyer’s requests to continue redeeming the IOUs for their full value in cash.
Citi and Bank of the West were the only banks to agree to Lockyer’s entreaty, the treasurer said in a statement. US Bank had yet to make a definitive decision as of Friday.
Lockyer said the other banks’ refusal to keep taking IOUs was “disappointing.”
Bank of the West decided to allow customers to deposit IOUs indefinitely, said Tom Dresslar, a spokesman for Lockyer’s office. Citi extended its deadline by one week, to July 17. The bank will accept IOUs only from people who were customers as of June 30.
“We do not want to penalize our business and consumer customers for the impasse in Sacramento,” Rebecca Macieira-Kaufmann, president of Citibank California, said in a statement.
The IOUs reach maturity in October. But creditors -- including citizens expecting tax refunds, state vendors and city governments -- may have to turn to credit unions or secondary markets to recoup some or all of their value before then.