The Swarm

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October 9, 2008
Lockyer is trying to sell $4B in notes, Schwarzenegger tells Paulson

Gov. Arnold Schwarzenegger just sent another letter to Treasury Secretary Henry Paulson regarding the possibility that California might need a $7B loan to get it through the month.

In the letter, the governor says State Treasurer Bill Locker is in the process of trying to sell the first $4 billion in "bond anticipation notes." If that happens -- Massachusetts was able to get a loan yesterday -- it could make it easier for California to get all the credit it needs to the market to make it through the month.

But Lockyer hasn't yet sold the notes, so Schwarzenegger's letter leaves the door open on California seeking a federal loan if the credit market remains in a semi-panic.

Gov's letter is on the jump.

October 9, 2008


The Honorable Henry M. Paulson, Jr.

Secretary of the Treasury

1500 Pennsylvania Avenue, NW

Washington, DC  20220


Dear Mr. Secretary,


I congratulate you on the passage of the Emergency Economic Stabilization Act (EESA).  As I've said before, bringing stability and liquidity to the U.S. financial markets is essential to protecting the life savings, businesses, retirement plans and jobs of millions of our fellow Americans.  This rescue plan is particularly vital in California, where we have been especially hard hit by home foreclosures and the economic downturn.


Last week, I alerted you to the immediate challenges California and a number of others states and local governments are experiencing due to the lack of liquidity in the credit markets.  I write to update you on our situation and inform you of our progress.


Yesterday, California State Treasurer Bill Lockyer officially began the process of selling the first $4 billion tranche of $7 billion in Revenue Anticipation Notes, our normal short-term cash flow borrowing instrument.  Although it's difficult to assess market conditions with perfect precision, the passage of EESA and ongoing actions by the Federal Deposit Insurance Corporation and the Federal Reserve System appear to be improving liquidity.  We are also encouraged by the state of Massachusetts's sale of $750 million in short-term notes yesterday, and we're hopeful we can successfully sell these notes.  


Although California feels the enormous effects of our current economic crisis, I am optimistic that these efforts to improve liquidity are moving the country toward more stable economic footing.  I will continue to update you on our progress.  Thank you for your continued vigilance in addressing these urgent matters.






Arnold Schwarzenegger

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About The Swarm

The Swarm is written by members of The Sacramento Bee's editorial board. They meet daily and are separate from the newsroom. Views included here are those of individual writers, and do not necessarily reflect those of a majority of the board or the positions expressed in The Bee's editorials.

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