Everybody Is Asking For Loans Now; Schwarzenegger: Calif. May Need $7 BILLION Loan, Oh Really!!!!!!!

by **J The Kidd** Fri Oct 03, 2008 3:57 pm

California may need an emergency loan of up to $7 billion from the
federal government within weeks, the Los Angeles Times on Friday quoted
Gov. Arnold Schwarzenegger as saying in a letter to U.S. Treasury
Secretary Henry Paulson.

In the letter dated October 2, Schwarzenegger called for the
passage of the $700 billion financial industry bailout plan which the
U.S. House of Representatives is expected to vote on Friday, the Times
said.

“Absent a clear resolution to this financial crisis, California and
other states may be unable to obtain the necessary level of financing
to maintain government operations and may be forced to turn to the
federal treasury for short-term financing,” Schwarzenegger wrote in the
letter, according to the paper.

A top Schwarzenegger aide followed up the letter with a call to the Treasury secretary on Thursday night, the paper said.

The California governor’s office and the U.S. Treasury department could not immediately be reached for comment.

The state of California is the biggest of several governments
nationwide that are being locked out of the bond market by the global
credit crunch, the newspaper reported. According to report, if the
state is unable to access the cash payments to schools and other
government entities could quickly be suspended and state employees
could be laid off.

Credit markets worldwide have frozen up in the two weeks since the
failure of U.S. investment bank Lehman Brothers, prompting concerns
that issuers will run into trouble rolling over previous loans.

In the letter, Schwarzenegger noted California’s plans to issue $7
billion in revenue anticipation notes in the coming days to fund
short-term cash needs — now put in doubt by the crisis in the credit
markets.

On Wednesday, California Treasurer Bill Lockyer said the most populous
U.S. state’s cash reserves may be exhausted near the end of October,
and various state-funded services are at risk of grinding to a halt.

He said the planned notes sale was at risk from the uncertainty
gripping financial markets and the U.S. government’s lack of response
to it.

Lockyer, who manages the bonds of the biggest issuer of public debt in
the United States, said the credit market was simply frozen because
financial institutions were afraid to commit capital amid enormous
uncertainty.

“The economic fallout from this national credit crisis continues to
drain state tax coffers, making it even more difficult to weather the
continuation of frozen credit markets for any length of time. I will
continue to do all I can to encourage the passage of the emergency
rescue plan,” Schwarzenegger wrote.