California, Short of Cash, May Ask U.S. for Loan

With the credit crisis cutting off access to short-term financing, California officials said the state may be forced to ask the United States government to lend it $7 billion, warning that the state could run out of money in a few weeks without it. Gov. Arnold Schwarzenegger in a letter Thursday night to Treasury Secretary Henry M. Paulson Jr. said that with credit markets essentially frozen, the state, like a slew of others and local governments nationwide, had no access to the short-term financing that normally support day-to-day operations. "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," Mr. Schwarzenegger said in the letter, which was first reported by The Los Angeles Times. Treasury officials said they were reviewing the letter. As the nation's most populous state, California's precarious finances underscore the depths of the financial crisis. The emergency handout, the equivalent of $192 for each resident, would rival the federal government's bailout of New York City in 1975 as it teetered on bankruptcy. At a news conference Friday morning in San Diego, Mr. Schwarzenegger congratulated Congress on approving the $700 billion bailout for the financial system, but warned that the state still could face financial turmoil. "California is not out of the woods yet," he said. The state, he added, would pursue short-term financing through the credit markets, but "it is hard to get that loan."