Friday, October 03, 2008
The LA Times reports California Governor Arnold Schwarzeneggar wrote a letter to Treasury Secretary Hank Paulson yesterday commending him on his efforts to bail out the global economy but warning that the nation's largest state might need a bailout too if the credit crisis goes on much longer.
The governor is in the middle of a painful learning process about how it's much, much easier to govern when you have a housing bubble, rather than a housing bust. Here's the letter(.pdf) with a nice, bold signature at the end.
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.Note that the picture above did not appear in the original LA Times story.
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.
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.