• BREAKING NEWS ABC shows live and on-demand -- Download the WATCH ABC app!

Calif. borrows $5B ahead of possible debt crisis

As protection against a potential default by the federal government, California has taken out a loan from private investors.

July 27, 2011 12:00:00 AM PDT
As protection against a potential default by the federal government, California has taken out a loan from private investors.

The state treasurer has secured a $5.4 billion loan package from a mix of banks, credit unions and investment funds.

The money will be used to help programs typically funded by federal money.

Treasurer Bill Lockyer said the loans should be repaid later this summer.

The treasurer said he took the step as a precaution if the federal government can't meet all its obligations.

"California had to obtain this interim financing to protect the state from the immediate, drastic consequences of a failure by Washington to resolve the debt ceiling impasse by the Aug. 2 deadline," Lockyer said in a statement. "I'm hopeful Congress and the president will do the responsible thing, solve the problem before it's too late, and not risk pushing the country into a financial and economic abyss."

The Associated Press contributed to this report.


Load Comments