Crisis: California can't raise credit. Needs $7b emergency Federal loan

[denem]

From the UK Telegraph:

Arnold Schwarzenegger: California needs $7 billion loan to fend off credit crisis

In a letter sent on Thursday to Henry Paulson, the US Treasury Secretary, Mr Schwarzenegger, California's governor, made clear that his state was running out of money because its usual borrowing channels had suddenly closed.

He made clear there would be grave consequences for the ability of American states to keep providing basic services if the $700 billion Wall Street bailout plan is not passed by the US House of Representatives.

That even America's richest and most populous state should face such severe financial problems illustrates the extent to which credit markets have seized up in the two weeks since the failure of the investment bank Lehman Brothers.

The US government has not been called on to make such a large emergency loan since New York City borrowed $2.3 billion – equivalent to $9.4 billion today – to stave off bankruptcy in 1975.

http://www.telegraph.co.uk/news/newstopics/celebritynews/3130508/Arnold-Schwarzenegger-California-needs-7-billion-loan-to-fend-off-credit-crisis.html

Um .. while the report may it a bit dramatic - Arnold was lobbying for the bailout to pass, and it comes against the background the state budget battle, it does underlie that the problem is the CREDIT CRISIS - money not stocks. Bailout or no bailout, the Fed has been pushing massive amounts of money into the system, with little to show for it.