Thursday, November 29, 2007

Credit crisis is no longer contained. Florida teachers to miss paychecks

Look for the FED to drop rates by 50 bps in their December meeting. This credit crisis is no longer contained. I hope the local city and county officials check their investments in LAIF (the California equivalent).

From Bloomberg:

Nov. 29 (Bloomberg) -- Florida officials voted to suspend withdrawals from an investment fund for schools and local governments after redemptions sparked by downgrades of debt held in the portfolio reduced assets by 44 percent.

The Local Government Investment Pool had $3.5 billion of withdrawals today alone, putting assets at $15 billion, said Coleman Stipanovich, executive director of the State Board of Administration, at a special meeting held to address the crisis. The board manages the fund along with other short-term investments and the state's $137 billion pension fund.

``If we don't do something quickly, we're not going to have an investment pool,'' Stipanovich said at the meeting, held at the state capitol in Tallahassee. The fund was the largest of its kind, managing $27 billion before this month's withdrawals.

Local governments including Orange County and Pompano Beach that use the pool like a money-market fund asked for their money back after the State Board of Administration disclosed in a report earlier this month that holdings in the fund were lowered to below investment grade. The disclosures followed a month of inquiries by Bloomberg News to Florida officials.

Paychecks Threatened

Hal Wilson, chief financial officer for the school district in Jefferson County, located 30 miles (42 kilometers) east of Tallahassee, said he had decided not to pull the district's $2.7 million from the fund. He said he relied on assurances from the state board that the money would be secure for his 1,559-student school system, with 220 employees.

``I might not be able to pay our employees tomorrow,'' he said, referring to his $850,000 payroll. ``I am sure that those money managers who withdrew all their funds are feeling really smug right now, thinking they did the right thing. But it left the rest of us holding the bag.''

From the Florida Investment pool website:

By decision of the Trustees of the State Board of Administration at their November 29, 2007 Special Meeting, the Florida Local Government Investment Pool will temporarily not accept or process deposit or withdrawal requests after 11am November 29, 2007. On December 4, 2007, Trustees of the State Board of Administration will hold a regularly scheduled meeting and consider options with respect to resuming accepting and processing deposit or withdrawal requests.

1 comment:

hankmeister said...

Isn't that what Roosevelt called a "Bank holiday"??? I'm curious how Calpers is doing.