California Finds Gold In Credit Markets

Remember last week when the Governator, Arnold Schwarzenegger, wrote back to Hank Paulson to say that despite his request for $7 billion the week earlier, he wouldn’t be needing that money after all? Instead, California was going to try to get the debt it needed out of the bond markets?

We thought, Are you kidding? We imagined Arnold writing Hank again to say, “Actually we might need a small loan…”

Well, it turns out that the entire state must have had access to some of Hollywood’s economic downturn-avoiding magic dust, because California found the money it needed in the credit markets.

Wait. How did that happen? Seriously, investment bankers around the world would like to know.

NYT: California has managed to borrow $5 billion in the credit markets, the state treasurer announced Thursday, averting a severe cash shortage that could have led to service cuts and layoffs. But more fiscal troubles loomed on the horizon here…

[o]n Thursday officials were rejoicing at a better-than-expected reception to the sale of the state’s “revenue anticipation notes,” essentially short-term loans to tide it over until its spring tax collections refill coffers.

While the state, one of the world’s biggest economies, initially planned to seek $4 billion, it ended up with $5 billion, a result of both the loosening market and a sales pitch that included Mr. Schwarzenegger in radio advertisements urging people to invest in the state, said Bill Lockyer, the state treasurer.

“I think people thought it was a safe place to put their money,” Mr. Lockyer said. The state plans to seek the remaining $2 billion of the $7 billion needed at a later date.

See Also: Governator To Paulson: About That $7 Billion, Never Mind

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