California's Governor Arnold Schwarzenegger may need an emergency loan from the U.S. treasury because of a lack of liquidity in the credit market, Reuters reported on Friday. In a letter to Treasury Secretary Henry Paulson, Schwarzenegger says that California needs $7 billion to cover short-term expenses and has planned to issue revenue anticipation notes for it. “Absent a clear resolution to this financial crisis that restores confidence and liquidity to the credit markets, 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 said in the letter dated October 2 and provided to Reuters on Friday. “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,” Schwarzenegger said. News of the letter broke as House of Representatives lawmakers opened debate on a new version of the $700 billion emergency financial rescue plan that they voted down on Monday. This version passed the Senate earlier in the week, but still faces tough opposition from a broad swathe of lawmakers.
