Arnold Schwarzenegger, California’s governor, has told the federal government that upheaval in the credit markets could leave his state in need of an emergency $7bn loan to pay for public services such as law enforcement, hospitals and firefighting.

California taps the credit markets around this time every year to raise “revenue anticipation notes”, which tide it over until tax revenues arrive in spring. But with credit markets frozen, it does not expect to raise sufficient funds from investors this year, leaving it short of cash. It needs the money by the end of October.