Friday, July 10, 2009

Having fun with IOUs in California

To the left you can see a registered warrant that happens to be an IOU, in the state of California. You might ask yourself, isn't a warrant something that a court will issue for your arrest for some type of crime? Yes it is, but for those of you new to the wonderful world of California world of finance, a "registered warrant" is actually what most of us would think of as a "check," something which, normally, you could deposit in a bank.

However, if you look carefully at the picture to the left, you might notice that there are several words that differentiate this registered warrant from a check, due to the following words: "This Registered Warrant will be honored on or or after 10/2/09." Aha, that is what separates this warrant from a check, because this means that this check cannot be deposited in a bank account until 10/2/09, unless, of course, you are one of the lucky ones who has a bank that will actually take this things as payment. After July 10, a number of these elite institutions, which exist to protect and serve us all, as I discussed in my previous blog, have said that they will no longer accept such "instruments" as payment. So, one might ask, if I have been paid one of these glorious-looking pieces of paper by the state, what can I do?

Do not fret, my fellow Californians, the IOU Stressbuster is here. (I was thinking of analogizing this to "Ghostbusters," which came out in 1984, but since many of my potential readers are too young to remember this, I will not dwell on this point). So, here are some of my IOU Stressbuster solutions:

1. You may be one of the fortunate ones whose banks might opt to accept one of these sharp-looking pieces of paper as payment anyway. Le chayim! (which means to life in Hebrew). Life is good, so fret no longer.

2. The state of California has indicated that those who wish to pay their bills to the State of California may be able to take an IOU, and, voila, send it back to the State to pay their bills. The thought of doing this is delicious. Just imagine if the State of California owed you some money, and sent you, say, $30,000. What if, for example, you were a tax cheat and you owed the state of California, say, $500,000. If you were exceptionally shrewd, you could turn around and send them some of this "funny money" that you had recently received from the state back to the state in payment of your debt. But, you might ask, how can you get away with paying the state "funny money" for 30K and thus shorting the state by 470K? The answer is that with the state laying off tons of workers, and "furloughing" other workers for two or three days a month (i.e giving them unpaid leave so they can spend quality time with their families, while they are scrounging for leftover food in dumpsters since they will have virtually no money on which to live), the state audit division is probably low on employees, so, if you are really lucky, they won't notice. If they do notice, and you end up in with an immense amount of fines and penalties, you can at least be satisfied that you did your best to "take one for the team."

3. The "secondary market" option--This means that there may be people that actually want to buy and sell these warrants/IOUs. So, in other words, somebody might buy your warrant for a discount, and then sell it for a markup later on. Or, if you want to try out a different kind of "secondary market" a try, you might want to consider using an illegal poker game as a market, especially if you have lots of rich friends who have lots of money to "burn," just as many of us feel "burned" since we have to put up with this nonsense. Let's say that you enter a high-stakes poker game, and you decide to go for it, by putting up an IOU for your bet. If somebody is stupid enough to take your bet, and you lose the bet, voila! Just hand them the piece of paper, and tell them that it is a warrant, from the state of California. Remember, per our economics lesson above, all items that look like checks from the state of California actually are called warrants. However, as we know, in regards to IOUS, in this case, just because it "walks like a duck," and, in this case, it definitely smells like a duck, it may not be a duck at all, because warrants that are IOUs are not treated by banks like checks unless, you are lucky enough to have a bank that does treat the warrants which are IOUS as checks, even though they are not really checks.. Are you confused yet? I know that I am, as well as probably most people in the Great State of California. Anyway, this betting strategy is worth a try, but, just in case the people you are playing are the impatient, unfriendly, possibly violent kind, make sure that you bring your best running shoes with you to the poker game, so that you can make a timely escape if that is what the situation requires.

4. If you are one of the unfortunate ones who are stuck with many warrants/IOUS, you might consider using the warrants to construct a model of a house, since you may be among these who have found that they cannot afford the house that they are living in, meaning that such a paper IOU/warrant house is the fanciest house you will ever be able to afford. Be careful when you build your IOU/warrant house that you do not unduly damage the IOU/warrants too much, so you don't have excess damage to your house of cards/IOUS/warrants/checks when it tumbles to the ground, just as the economy of our state has being doing lately.

5. Another possibility is neatly stacking your warrants/IOUS in a vertical manner, such that the warrant/IOUS can be used as the modern equivalent of a domino rally, where the warrants can be neatly aligned all over your living room, so that as soon as you knock over one warrant/IOU, all rest of the fall over in a properly synchronized fashion. If you are really clever, you can set up your warrant/IOUS all over your residence, so that, once you have perfected your techniques, you can have the pleasure of watching the warrant/IOUS/checks (maybe) beautifully undulating everywhere you look.

6. Having IOU/warrants can be of great assistance in maintaining a clean and healthy lifestyle. You can use the IOUs to clean your shaver, and, if you cannot afford a vacuum cleaner, and perhaps, even a broom, you can use the warrants to scoop up any refuse and carefully empty it into any nearby trash bags. Remember, however, to keep the IOU/warrant in a clean and sanitary condition, in the event that you intend to have an alternative use of the IOU/warrant in the future.

7. Finally, an IOU/warrant is a fine idea for a gift. Imagine what pleasure you can give to your aunt in Wisconsin, if, in the event that you cannot afford a gift for her this year, since you have no money, you can just take the warrant, put it an envelope, and send it to her. Or, when Christmas or Hanukah rolls around, in December, since the economic situation in California may still be unresolved at this time, an IOU/warrant is truly a gift that keeps on giving.

Happy IOU Stressbusting!


  1. Great ideas! I am in possession of one of these IOUs... having paid over $800 in state taxes for my non-profit organization, Annie'sBlankets, and then receiving our state exemption letter one week later. Of course, the state "lost" the check for a while (6 months) and, after repeated phone calls, I finally received reimbursement... in the form of an $800 IOU. Yikes. Guess the homeless cats and dogs that we help with Annie'sBlankets will have to wait, along with everyone else.

  2. Hi Edie,

    Thanks. Even though the budget crisis is "over," those of us who are stuck with the IOUs still have to wait until October to get paid. If you have to pay the state of California for anything between now and October, feel free to send them their IOU as payment, since the state of California is required to accept them as payment (like the rest of us)