Bankruptcy

I'm Confused (California Edition)

By Stephen Lubben

On the day that California's credit rating has dropped through the floor, the FT has an article noting that traders are looking to buy the IOUs that California has been issuing to pay daily obligations, quoting one buyer who "would like" to purchase the IOUs for 50% of face.  But the same article goes on to note that key banks in California are accepting the IOUs as deposits -- so if I can sell my IOU to Wells Fargo for 100, why exactly would I sell it to the random trader in Ohio for 50? 

Another example of the "float a wacky idea to get in the paper" phenomenon, I suspect. 

Full post as published by Credit Slips on July 06, 2009 (boomark / email).