Schwarzenegger seeks $7 billion from Paulson due to credit crisis

Once again showing that this crisis is well beyond just Wall Street. Business, individuals and even states are not receiving loans because the credit system has dried up. Even here in France, which has a radically different banking system and is less impacted by Libor rates, many businesses are unable to get loans these days. We are going to have to make some big changes to the system in the very near future and letting bank executives cash in on bogus paper being bought and sold has to be scrapped. Congress still needs to revisit the Wall Street execs who walked away with hundreds of millions and hold them accountable for this widespread disaster.

California Gov. Arnold Schwarzenegger, alarmed by the ongoing national financial crisis, warned Treasury Secretary Henry M. Paulson on Thursday that the state might need an emergency loan of as much as $7 billion from the federal government within weeks.

The warning comes as California is close to running out of cash to fund day-to-day government operations and is unable to access routine short-term loans that it typically relies on to remain solvent.

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. If the state is unable to access the cash, administration officials say, payments to schools and other government entities could quickly be suspended and state employees could be laid off.

Plans by several state and local governments to borrow in recent days have been upended by the credit freeze. New Mexico was forced to put off a $500-million bond sale, Massachusetts had to pull the plug halfway into a $400-million offering, and Maine is considering canceling road projects that were to be funded with bonds.

California finance experts say they know of no time in recent history when the state has sought an emergency loan of this magnitude from the federal government. The only other such rescue was in 1975, they said, when the federal government lent New York City money to avoid bankruptcy.


An American in Paris, France. BA in History & Political Science from Ohio State. Provided consulting services to US software startups, launching new business overseas that have both IPO’d and sold to well-known global software companies. Currently launching a new cloud-based startup. Full bio here.

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