What the Fed? Cali IOUs Are Securities

The SEC has given its blessing to the state of California by deeming the IOUs it's issuing amid its budget crisis to be municipal securities.

Investors and holders of the IOUs were looking for guidance on the instruments as the big banks kept flip-flopping on whether the IOUs would be accepted. Bank of America(BAC Quote) announced only a limited acceptance of the state-issued scrip.

Web sites sprung up in the absence of any guidance to create a secondary market for these securities: Buymyiou.com is one, and good old Craigslist entered the fray as holders looked for a way to cash them in. Luckily, the warrants weren't listed as "curb alerts" on Craigslist.

No doubt the exchanges weren't too happy to lose business, so low and behold the IOU's were magically deemed securities. Is there an office pool on how long will it take before CME Group(CME Quote) creates a futures market for California IOUs? How about a Deutsche Bank(DB Quote) Powershares Double Short Cali ETF? ...