California gov says may seek US Treasury financing

SAN FRANCISCO, Oct 3 (Reuters) - California Gov. Arnold Schwarzenegger has informed U.S. Treasury Secretary Henry Paulson that the most populous U.S. state may need to turn to the federal government for short-term financing because of a lack of liquidity in credit markets.

California needs $7 billion to cover short-term expenses and has planned to issue revenue anticipation notes for it.

"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," Schwarzenegger said in a letter to Paulson dated Oct. 2 and provided to Reuters on Friday.

"The economic fallout from this national credit crisis continues to drain state tax coffers, making it even more difficult to weather the continuation of frozen credit markets for any length of time," Schwarzenegger said, adding he supports a $700 billion emergency financial rescue plan due to be voted on Friday by the U.S. House of Representatives. (Reporting by Jim Christie; Editing by James Dalgleish)