December 4, 2007
Euphemism Watch: Automatic Liquidation Event
Florida School Fund Rocked by $8 Billion Pullout
“The Florida pool, which was the largest of its kind in the U.S. at $27 billion before the recent spate of withdrawals, has invested $2 billion in SIVs and other subprime-tainted debt, state records show. Connecticut, Maine, Montana and King County, Washington, are among other governments holding similar investments, in smaller quantities.
The Florida pool’s $900 million of defaulted asset-backed commercial paper now amounts to almost 5 percent of its holdings. The paper, which carried top ratings from S&P, Moody’s Investors Service and Fitch Ratings as recently as August, was downgraded after declines in the value of collateral affected by the subprime mortgage slump.”
Wall Street once again able to foist junk on gullible and probably greedy investors … local and state government-run funds must be the easiest “marks.” Does anyone know the definitive article or book written on the Orange County (not Florida, ha!), California debacle? I’d love to read it.
Florida Says Unfreezing Fund Would Spark `Fire Sale’
“‘We’re fiduciaries, we’re investment professionals, we know what we’re doing,’ State Board of Administration executive director Coleman Stipanovich said Nov. 29.”
Hee-haw!
December 4th, 2007 at 11:19 am
Ratings downgrades start a whole series of negative consequences, don’t they? And the cycle has just begun.
Re: The O.C. BK - When Government Fails.
December 4th, 2007 at 11:29 am
CapGain: Yes, and a bank run is a very scary thing. Lehman will no doubt get sued for misrepresenting the product but I think the most interesting thing about this whole credit crisis is the role played by the ratings agency oligopoly — that’s where the greatest breach of trust happened imho.
December 4th, 2007 at 3:06 pm
I agree.
December 4th, 2007 at 4:23 pm
Yeah we brushed over the OC bonds debacle a few months back in a course I did at Qinghua. Heres an article that covers it well, a link from bob citrons wiki entry …
http://www.allbusiness.com/personal-finance/740233.html
December 4th, 2007 at 5:12 pm
Nik: Thanks for the link; talk about pagination hell: they spread that sucker over 13 pages, the greedy bastards.
December 4th, 2007 at 5:17 pm
Slightly off the subject,but Maria B on CNBC reinterviewed Hank Paulson today(Mon).He stammered when She nailed Him on His plans for Mortgages and said it will be a slow process.It will redo some Mortgages not deserving of help but is basically good.Many People see a free lunch in refinancing and thinking it an easy out jumped without reading anything.Even if read most would not understand consequences and jump.Easy outs do not work,a bit of financial education helps but the greed of low payments is too much and a pure turn down only answer.Paulson’s fund is as much an unknown pricing as any Mortgage Package.The man did great at Goldman but this mess is hard to redo.Easy money isn’t easy!!
ike
December 4th, 2007 at 11:37 pm
Real estate trends are by far the longest-lasting and slowest-moving of any asset class. Which of these trends (price or foreclosure) shows even the slightest hint of change?
http://tinyurl.com/2toelr
It looks to me like it is just starting.
December 5th, 2007 at 2:09 am
Maybe the best part of the story? The Jeb connection:
A majority of this paper was sold to SBA by Lehman Brothers (nyse: LEH - news - people ). Bush, as the state’s top elected official, served on a three-member board that oversaw the SBA until he retired as governor in January. In August, Bush was hired as a consultant to the bank.
http://www.forbes.com/business/2007/11/30/florida-bush-lehman-biz-beltway-cx_mb_1130florida.html
December 6th, 2007 at 2:18 am
Speaking of rating agencies, MBI and ABK are getting whacked. How is this a surprise?