California "IOU" recipients can turn to credit unions and check-cashing storefronts if a state budget deal does not appear by Friday and if three major banks refuse to accepting the notes beyond Friday as planned, analysts said on Tuesday.
The willingness of the smaller institutions to take IOUs from the cash-strapped state should also stop the development of a secondary market for trading them, although individuals could end up paying hefty fees to get their hands on cash.
Three major banks are currently accepting the IOUs, but only through Friday. After that recipients may turn to credit unions to cash them or, perhaps, to check-cashing storefronts.
Their cashiers could see more than $3 billion of the IOUs at their windows this month should the state budget crisis persist and big banks hold to their Friday cut-off for processing them.
Check-cashing storefronts are especially well poised to score IOUs, said Daniel Penrod, a senior industry analyst at the California Credit Union League.
"I could see a lot of bank customers turning to a third-party source and losing a lot of their paycheck," Penrod said.
So, the IOU recipients get a pay cut anyway, but the money will go to payday loan sharks instead of the state, which will continue to go broke. These free markets are just awesome,