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Is New Jersey the canary in Meredith Whitney's coalmine? According to the WSJ, New Jersey may be the first state to use the highly unconventional approach of using a commercial bank funded bridge loan as large as $2.25 billion to "plug a cash shortfall." The loan raised by Chris Christie's state, "would cover bills the state will need to pay as its new fiscal year begins July 1. Normally, states have some cash available as they finish one fiscal year and begin the next, while gearing up for a bond offering based on the new budget.
One person familiar with some proposed terms of the possible loan said the interest rate is relatively low, but it could shoot as high as 9% if the state didn't pay back the bank in six months.