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California in cash crunch, Schwarzenegger seeks bailout

Oct 05, 2008 02:04 PM IST India India

California: Hollywood hunk Arnold Schwarzenegger may have battled all the bad guys on celluloid and won but the California Governor just can't seem to beat the credit crunch. Schwarzenegger, often called the Governator, after his famous Terminator series of Hollywood flicks, is now looking for a federal bailout. He says his state will run out of money for key programs by the end of this month. In an unusual and unprecedented move by a state, Schwarzenegger on Thursday sent Treasury Secretary of the US, Henry Paulson a letter warning that California may need an emergency loan. Schwarzenegger pegs his state's requirement at US $7 billion if the state is not able to get the short term loans it normally relies on at this time of the year. "That's something that happens every year and other states it also the only thing is right now because liquidity has dried up doesn't exist so therefore it's very hard not to get that loan so if we can't get that loan through the normal course we will go the federal government and ask for help,” he said. Schwarzenegger says that his state, California is buckling under pressure caused by the housing crisis, the global credit freeze and the loss of tens of thousands of jobs. "Seven billion is the amount that we knew we needed two months ago. We need it now. So there's nothing new with the amount it's just that we need that money and cash is running out," added Schwarzenegger. This translates into a potential inability to make payrolls in the coming months, to teachers, law enforcement and hospital workers and others. According to UCLA economist, Dan Mitchell, the situation does not paint a very sunny picture. "In this case, if we went without our loan for some significant period of time there would be a lot of people who would essentially get IOU's and they would have to try to take those IOU's to their banks and hope that somebody would give them a loan for that period,” explains Mitchell. That is a scary thought for Los Angeles Maintenance Worker, Edwardo Soto. He worries that he will not be able to pay bills with an IOU. "We're not going to stay over here and wait and see if they have money or not. We can go somewhere else," said Soto. But jobs are tight already! 20,000 lay off notices have gone out to California teachers and the next year, many more may face the same fate. Sacramento county employee Kim West worries that the city and county workers will also feel the impact. "I would be very upset. I'm upset now because I'm getting the indirect effects of it and I wouldn't be able to afford my home. I also wouldn't be able to provide for my family," said a fearful West. The Governor will be holding a special meeting with state legislators next week to make sure that does become a reality.