Saturday, December 01, 2007

Part II of the "Mortgage Problems"

While the Radio Guys are dismissive about the 'mortgage problems', the effects are beginning to surface in unexpected ways and places.

School districts, counties and cities across Florida sought to raise cash after being denied access to their deposits in a $15 billion state-run investment fund.

The Jefferson County school district was forced to take out a short-term loan to cover payroll for the 220 teachers and other employees in the system after $2.7 million it held in the pool was frozen yesterday. At least five other districts also obtained last-minute loans, said Wayne Blanton, executive director of the Florida School Boards Association.

Florida's State Board of Administration, manager of the Local Government Investment Pool, halted withdrawals yesterday at an emergency meeting after $13 billion was pulled out this month from participants. Governments from Orange County, home of Disney World, to Pompano Beach asked for their money back following disclosures that the fund held $1.5 billion of downgraded and defaulted debt.

Well, it was high-yield stuff. Better than Bank money-market rates. No-brainer.


The Florida fund had invested $2 billion in structured investment vehicles, or SIVs, and other debt tainted by the collapse of the subprime mortgage market, state records show. Connecticut, Maine, Montana and King County, Washington, are among other governments holding similar investments, in smaller quantities, in some cases prompting redemptions.

Maybe an enterprising Milwaukee JS reporter will ask some questions of various Wisconsin investment entities.

Then again, maybe not.

HT: Calculated Risk

1 comment:

Random10 said...

I have been saying it is market demand from 'professional' money managers for 'high yield' investments that creates, fuels and sustains the subprime mess. Lenders were making lax underwriting loans only because they could sell them off their books almost before the ink dries on the notes.

The ironic thing is that these 'professional' money managers were buying a product ID number with a stated probable yield and certificate of authenticity from some rating agency --- and no one in the whole decision chain has any idea of what underlying assets are. There is an old corporate saying: ‘Trust the System’. A whole lot of people forget the sage modification: 'Trust but Verify'.