The pressure keeps mounting on Governor Schwarzenegger as a group of major US banks refuses to accept California’s IOUs. 

Among others, Citigroup, Bank Of America, Wells Fargo, and JP Morgan Chase  have all stated that they will stop accepting IOUs from the state on Friday, July 10th.  The decision is a major policy turnaround for the banks, who previously claimed they would take the promissory paper.  They cite fraud issues (and the fact that there are no procedures in place for accepting markers) as the reason for the move.

California officials said they were “disappointed” in the decision but noted that a few smaller banks, and dozens of credit unions, will still be accepting the state’s word in lieu of cash.

The news came after a Monday meeting between Governor T-800 and California lawmakers failed to produce any movement on the state’s budgetary problems.  As a result Fitch Ratings cut the state’s general obligation debt rating.  It now stands a mere two notches above junk status, and is on the watchlist for further downgrades.  California’s debt was $2.8 billion in June,is still growing, and is likely to top $10 billion by September.

-Robert Laurie