The fatuous anxiety of the banks

Several of the state's leading banks, meanwhile, said they would accept the IOUs, formally known as registered warrants, but only until July 10. Others had not decided yet.
"Given the poor credit rating of California – the worst in the nation – banks may be hesitant to extend credit to the state," Rod Brown, president and CEO of the California Bankers Association, said in a prepared release. -- Sacramento Bee, July 3, 2009
Last month, when the US Congress failed to pass a bankruptcy reform measure that would have allowed home mortgages to be modified in bankruptcy, senator Dick Durbin succinctly commented: "The banks own the place." That seems pretty clear.
After all, it was the banks' greed that fed the housing bubble with loony loans that were guaranteed to go bad. Of course the finance guys also made a fortune guaranteeing the loans that were guaranteed to go bad (ie AIG), and when everything went bust, the taxpayers got handed the bill. The cost of the bailout will certainly be in the hundreds of billions, if not more than $1tn when it is all over. -- The Guardian, June 30, 2009

When the banks bust, they go to government for a bailout funded by taxpayers. When the State of California issues IOUs, the banks mutter darkly about the state's credit rating, which Fitch downgraded to BBB last weekend. Yet, the banks, among the other finance, insurance and real estate institutions that own the state Legislature lock, stock and barrel, were the prime mover in policies that promoted the speculative housing bubble that has now busted, causing a huge reduction in state revenues, which has reduced the state's credit rating to the worst in the nation, produced the largest number of foreclosures in the nation, reduced its once great public education system to about the same level of contempt, doubled the population of the state in 50 years, and has gone so far beyond the carrying capacity of the state's natural resources that we now live in perpetual water war.
A statewide California currency may be a way to get the state back on its feet, at least give it a breather to negotiate. Such currencies have historically been backed by the hard work and good faith of the people of the jurisdiction. Regretfully, in the case of California, this is an obstacle. Unemployment is rapidly rising and, although good faith exists here and there in the state, it has not been able to rule effectively since governments from the state level on down were bought by finance, insurance and real estate, including the banks.
Badlands Journal editorial board