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Buy and Sell Government IOUs

SecondMarket’s Government Warrant (IOU) Market facilitates transactions in registered warrants (IOUs) issued by the State of California. A number of states collectively face a $166 billion shortfall for fiscal year 2009*. As states attempt to work through budget issues, including by cutting expenses, raising taxes or issuing municipal securities to pay their bills, some are looking at issuing temporary warrants (IOUs) until sustainable funding options are reached.

On July 2, 2009, the State of California began paying local governments, tax refund recipients, vendors and others owed payments from the state with registered warrants, commonly called IOUs. Essentially, these IOUs represent a right to payment at a later date, while accruing interest at an annualized tax-free rate of 3.75%. With California IOU holders needing liquidity, SecondMarket has leveraged its technology and buyer base to create a centralized regulated marketplace, which gives holders the ability to list their IOUs in a competitive bidding environment.

*Center on Budget and Policy Priorities