California pleads for $7 billion loan to meet cash shortfall

California is jockeying for a multibillion-dollar emergency federal loan despite Friday's congressional approval of a rescue plan for the nation's troubled credit market.

"We're not out of the woods yet," Gov. Arnold Schwarzenegger said.

The governor had sent a letter Thursday to Treasury Secretary Henry M. Paulson warning that the state may be forced to turn to the federal treasury for help if it cannot quickly secure a short-term loan for up to $7 billion.

State officials hope that approval of the $700 billion national plan will loosen credit quickly, making it possible to borrow from traditional lenders the billions it needs this year - and annually - to bridge gaps until revenues flow in the spring.

Time is running short, however.

California is projected to exhaust its reserves - and dip $1.5 billion into the red - by Oct. 29 unless a short-term loan can be secured.

"If we can't get that loan through the normal course, we will go to the federal government and ask for help," Schwarzenegger said Friday. "And we have already set that in motion."

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