Chase will accept California IOUs for a week

Chase bank said Thursday it would accept government IOUs from California through July 10 to help its customers as the state deals with a financial crisis.

Chase, the U.S. consumer and commercial banking business of JPMorgan Chase & Co., said it will accept state of California registered warrants from customers through July 10 as a courtesy.

"We will accept the registered warrants from our customers to help them through this challenging time," said Pablo Sanchez, head of Chase's bank branches in the Western region. Chase has 710 bank branches in California.

The state's controller will start paying many of the state's bills with IOUs after lawmakers failed to close the state's worsening budget deficit of $24.3 billion.

The failure to balance the state's main checkbook and the looming IOUs prompted Gov. Arnold Schwarzenegger on Wednesday to declare a fiscal state of emergency.

It will be the first time since 1992 that California will have issued IOUs.

It was unclear whether some of California's largest banks will accept the state's IOUs as payment. They would be paid back, with interest, but the state's precarious financial condition and legislative gridlock might be making some bankers nervous.

Bank of America announced Wednesday it would cash the IOUs for its customers through July 10, bank spokeswoman Colleen Haggerty said. Schwarzenegger and state officials asked other banks to do the same, noting that California has never defaulted.