LAS VEGAS - A California state Treasury official - facing the need to borrow $7 billion in the short-term markets this month - expressed optimism that the $700 billion bailout enacted Friday would get the markets working again.
"Hopefully enactment of the recovery plan will inject confidence and trust into the system and unfreeze the credit markets so we can go about our cash-flow borrowing as we normally do," said Tom Dresslar, spokesman for Treasurer Bill Lockyer.
"To meet its cash-flow borrowing needs, the state plans to offer up to $7 billion of revenue anticipation notes in a public offering during the week of Oct. 13," Lockyer said in a statement late Friday. The sale will be managed by Banc of America Securities LLC and Goldman, Sachs & Co.
Keeping the state's options open, however, he said the $7 billion is not needed immediately and California could sell as little as $3 billion to $4 billion.
The aim of the bailout plan, devised by Treasury Secretary Henry Paulson, is to stabilize financial markets by giving the federal government authority to buy up illiquid assets.
Gov. Arnold Schwarzenegger added to the drama Friday before the congressional vote, publicizing a letter he wrote to Paulson saying the absence of a successful recovery plan would force California and other governments to turn to the U.S. Treasury for short-term financing.
"While some states may be able to absorb a delay or obtain high-interest financing through private banks, California is so large that our short-term cash flow needs exceed the entire budget of some states," Schwarzenegger wrote in the letter.
"Absent a clear resolution to this financial crisis that restores confidence and liquidity to the credit markets, 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," the governor wrote.
Dresslar said the state Treasurer's Office has been looking at a variety of options in recent weeks to accomplish the Ran sale, including assistance from the U.S. Treasury.
He added that there is no guarantee that Paulson's plan will actually work and restore life to financial markets that have all but frozen in the last few weeks.
"I will continue to work closely with Gov. Schwarzenegger to pursue other options to meet the state's cash-flow needs," Lockyer said Friday. "One of the avenues we will continue to explore is obtaining a loan from the federal government, and paying interest to the U.S. Treasury instead of banks or investors."
Jennifer Zuccarelli, a Treasury spokeswoman, declined to comment on Schwarzenegger's letter Friday, saying officials were still reviewing it, adding that she was not aware of any other similar letters from state or local governments.
Andrew Ackerman contributed to this story.