(Reuters) - California may need an emergency loan of up to $7 billion
from the federal government within weeks, the Los Angeles Times on
Friday quoted Gov. Arnold Schwarzenegger as saying in a letter to U.S.
Treasury Secretary Henry Paulson.

In the letter dated October 2, Schwarzenegger called for the passage
of the $700 billion financial industry bailout plan which the U.S.
House of Representatives is expected to vote on Friday, the Times
said.

“Absent a clear resolution to this financial crisis, 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 wrote in
the letter, according to the paper.

A top Schwarzenegger aide followed up the letter with a call to the
Treasury secretary on Thursday night, the paper said.

The California governor’s office and the U.S. Treasury department
could not immediately be reached for comment.

Credit markets worldwide have frozen up in the two weeks since the
failure of U.S. investment bank Lehman Brothers, prompting concerns
that issuers will run into trouble rolling over previous loans.

In the letter, Schwarzenegger noted California’s plans to issue $7
billion in revenue anticipation notes in the coming days to fund short-
tern cash needs — now put in doubt by the crisis in the credit
markets.

On Wednesday, California Treasurer Bill Lockyer said the most populous
U.S. state’s cash reserves may be exhausted near the end of October,
and various state-funded services are at risk of grinding to a halt.

He said the planned notes sale was at risk from the uncertainty
gripping financial markets and the U.S. government’s lack of response
to it.

Lockyer, who manages the bonds of the biggest issuer of public debt in
the United States, said the credit market was simply frozen because
financial institutions were afraid to commit capital amid enormous
uncertainty.

“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. I will
continue to do all I can to encourage the passage of the emergency
rescue plan,” Schwarzenegger wrote.

(Reporting by Ajay Kamalakaran in Bangalore; editing by Patrick Graham
and Mohammad Zargham)

—Commentary—  by DaveM

So let me get this straight…  not only did it take California’s governor a life time
to get the budget situation underhand, effecting thousands of
California employees and programs…  NOW he wants a loan from the
federal government, MORE of our tax dollars going to “bailout” the
system.  What is THIS money going for?  Not only have government officials spent $7 billion
dollars on a very unpopular  bailout for Wall Street, but now around 15 States will be asking for
money… when will it end?  I find it kind of fishy that the governor would ask for these funds only AFTER not being able to pull together the budget crisis in his own state.  Could this be a way of fixing his own mistakes by using the Federal Government and your hard earned dollars?  Time will tell.