California eyes $5 billion bank loan

By Ben Rooney, staff reporter


NEW YORK (CNNMoney.com) -- California is in talks with Wall Street banks to secure up to $5 billion in short-term loans following an exceptionally long budget impasse.

Treasurer Bill Lockyer said Monday at a banking conference in New York that he is working on a deal with Bank of America Merrill Lynch (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Goldman Sachs (GS, Fortune 500) and others.

But the final loan amount will not be known until California's legislature resolves a record-long budget impasse, according to Joe DeAnda, a spokesman for Lockyer.

"$5 billion is a possibility, but it could be more or less than that," he told CNNMoney.com. "The numbers will depend on the timing of the budget and the state's cash flow situation at the time of signing."

California has been without a budget since July 1, as state lawmakers grapple with a $19.1 billion shortfall. The impasse has resulted in state workers being furloughed and raised the possibility that the state would have to issue I.O.U.s to creditors.

The bank loans would be in lieu of money the state normally raises by selling short-term "revenue anticipation notes" to investors. But California cannot issue such debt due to disclosure requirements that it cannot fulfill without a budget.

Once the budget is passed, the state would issue notes within weeks to repay the bank loans, according to DeAnda. After a drawn-out budget stalemate in 2009, he said, California borrowed $1.5 billion which was repaid one month later.

Gov. Arnold Schwarzenegger said last week that state officials have reached "a framework of an agreement" on how to close the deficit. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 16,804.71 -238.19 -1.40%
Nasdaq 4,422.09 -71.31 -1.59%
S&P 500 1,946.16 -26.13 -1.32%
Treasuries 2.40 -0.10 -4.19%
Data as of 12:47am ET
Company Price Change % Change
Bank of America Corp... 16.82 -0.23 -1.35%
Ford Motor Co 14.59 -0.18 -1.22%
Facebook Inc 76.55 -2.49 -3.15%
Apple Inc 99.18 -1.57 -1.56%
Cisco Systems Inc 25.03 -0.08 -0.34%
Data as of Oct 1

Sections

In the last five years, pumpkin sales have risen 34% as people demand pumpkin in everything from beer to beef jerky. More

Facebook's chief product officer issued an apology to Sister Roma and the drag community on Wednesday for its flawed 'real name' policy. More

New York City launches a comprehensive site for all things related to its digital tech scene, Digital.NYC. More

For these seniors, the best retirement is not to retire. From a 102-year-old Wal-Mart worker to an activist park ranger, these workers have stayed on the job well into their golden years. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.