We are only two days from California issuing its own currency in the form of IOUs (dubbed Schwarzies by TILB) and we could hardly be more excited!
Schwarzenegger Scrip: we can almost taste it.
Yet, shockingly, until California gets the ratings agency granted credibility to pay off old Schwarzies with new Schwarzies (something akin to the crime Bernie Madoff received 150 years for... and the famous helicopter drop Dr. Ben Bernanke is regularly lauded for), some folks actually seem a bit timid about accepting Schwarzies.
"Who are these Schwarzie hating traitors," you might reasonably ask.
Well, your friendly neighborhood bankers at Wells Fargo and B of A - California's two largest banks - seem a tad bit hesitant to embrace the idea. As if California's mortgage default rate needed another reason to tick up...
B of A had this to say on the matter:
“Any action pursued by the state, such as issuing registered warrants, will require much greater specificity about rates, timelines, terms and many other variables for banks to determine ability to support such actions,” said BofA spokeswoman Colleen Haggerty in Los Angeles. “Speculating on a plan before the Legislature and governor have completed budget negotiations is premature.”Ha! Is B of A pretending like it actually does credit work on borrowers and underwrites loans? Where was that discipline when it counted?
In any case, I think if we learned anything from the Hartmarx and Chrysler debacles, it is that if our president deems you strategically important (for instance, you either employ 40,000 unionized democrats or you make his suits), resistance is futile; it is not up to the lending bank to make decisions about who gets loans or how defaulting borrowers are treated.
What's that you say? The Obama Administration has refused California's requests for the federal government to help it with loan guarantees or otherwise bailout the state's finances? Now, that just seems mean. Unless, of course, you believe in conspiracies...
You may have noted that so far we have only quoted one of our two friendly neighborhood bankers on the matter of Schwarzies. Have no fear, Wells Fargo issued an equally banal statement on the matter.
However, a little more digging will show Wells Fargo's true opinion on the matter. In a recent speech at Stanford, Wells CEO John Stumpf said the following:
"The state of California is in financial ruin,” Stumpf told those attending a statewide microfinance lenders’ conference at Stanford University. “The budget deficit in California is staggering.”Not exactly the words you want to hear from one of the largest potential cogs in the Schwarzie circulation system...
Stumpf went on to talk about the economic situation for California's citizens and corporations.
Stumpf said the recession is taking a toll on some of the loans made to creditworthy borrowers who lost their jobs and fell behind on payments.Welcome to a world where economic realities, put off for decades by politicians and citizens that believed in Tooth Fairy Economics*, come forth in a burst of killjoy that makes everyone play the hand they were actually dealt.
“Today we’re charging off loans to people we should have made loans to,” said Stumpf, reiterating that the bank avoided many of the exotic mortgages offered by rivals.
On the national economy, Stumpf said this is his “third rodeo” or downturn. He pointed to the deep recession of the early 1980s when the prime rate hit 21 percent and the struggling economy of the late 1980s that counted most the nation’s largest thrifts and major banks in Texas among its casualties. He says the economic fallout from the dot-com bust and Sept. 11 terrorist attacks was significant but not as harsh as the earlier recessions.
“This one feels different,” Stumpf said. “It feels different in the respect that the whole world is in recession.”
[Hat Tip: JC-FL]
*Okay, TILB is officially copywriting the term Tooth Fairy Economics
...or, perhaps not. We had never heard the term before writing it just a moment ago and were so pleased with its goodness that we were fully prepared to laud self congratulatory genius heapings upon ourselves. However, we subsequently Bing'd it and found out some dude named Tom Woods at Campaign For Liberty used the phrase last February. Two comments: 1) as much as we want to assume he's some lucky deuchebag and keep the phrase for ourself, we love the ideals of Campaign For Liberty; and 2) we still are claiming it for our own. This is like when two scientists make an advancement at the same time and both claim credit for it...oh, dammit.
Nix our cliam. It is his even if it should be ours. He bettered us by four months.
Damn you Tom Woods and your enviable creativity and pursuit of liberty (this guy atually wrote a book that has a forward by Ron Paul; TILB considers that a major portion of a complete life).
Credit where credit is due. We bow to you, Tom Woods.