JPMorgan Chase to Lend California $1.5B

By Jane Yager,  Newser Staff
Posted Aug 19, 2009 5:28 AM CDT
California State Controller John Chiang, issuer of the state's current IOUs, speaks at the Democratic National Convention in Denver, Tuesday, Aug. 26, 2008.    (AP Photo/Ron Edmonds)
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(Newser) – After joining other major banks in snubbing cash-strapped California last month, JPMorgan Chase has changed tack and is lending the state $1.5 billion to end its IOU program a month early. The short-term loan will enable California to start redeeming on Sept. 4 the IOUs it has been using since July to pay vendors and creditors, the LA Times reports.

The loan has little risk for JPMorgan: California will pay it back in full by late September by selling $10.5 billion in revenue anticipation notes due to mature next spring. The deal benefits JPMorgan by getting it back into the state's good graces, and signals improving fortunes for California, which yesterday moved off the S&P "negative credit watch" list.