California crunch eases

Finally a little good news. Gov. Arnold Schwarzenegger told Treasury Secretary Paulson this afternoon that recent actions by the feds "appear to be improving liquidity" in the state. Last week, he told Paulson that California might need up to $7 billion in short-term financing from the federal government because of the credit crunch. That set in motion fears that Washington would have to bankroll the state's payrolls and other everyday expenses – fears that were bandied about in the hours before the House passed the $700 billion bailout package. Here's a snippet from Arnold's letter to Hank:

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.