10/3T9:06 New & Notes

Schwarzenegger says to US: State may need $7-billion loan - LA Times
LA Times reports California Gov. Arnold Schwarzenegger, alarmed by the ongoing national financial crisis, warned Treasury Secretary Henry Paulson that the state might need an emergency loan of as much as $7 billion from the federal government within weeks. The warning comes as California is close to running out of cash to fund day-to-day government operations and is unable to access routine short-term loans that it typically relies on to remain solvent. The state of California is the biggest of several governments nationwide that are being locked out of the bond market by the global credit crunch. If the state is unable to access the cash, administration officials say, payments to schools and other government entities could quickly be suspended and state employees could be laid off.
RCM Comment: Update to the above story; now that the bailout bill has been passed the Cali. governator has said his state may not need the $7 billion. Whether or not the state needs the money, the above story illustrates the far reaching, tentacle-like nature of this credit crisis.

AIG American Intl: S&P revises CreditWatch status of AIG, Guaranteed Subs to negative (4.80 +0.80) -Update-
Standard & Poor's Ratings Services said that it revised the CreditWatch status of its ratings on American International Group and AIG's guaranteed subsidiaries to negative from developing. Standard & Poor's also said that the ratings on most of AIG's insurance operating subsidiaries remain on CreditWatch with developing implications. The 'A-/A-1' counterparty credit rating on AIG relies on the significant support from the $85 billion borrowing facility provided by the Federal Reserve Bank of New York. "The $61 billion draw to date on the facility is much larger than we had previously anticipated," noted Standard & Poor's credit analyst Rodney Clark. "This has caused the scope of the planned business sales to exceed our expectations." The ratings on AIG and its guaranteed subsidiaries are on CreditWatch negative to indicate that there could be downward pressure because of our view of the risks around the execution of the plan as well as the heavy debt-service requirements of a much smaller and less-diversified AIG.