Florida Junk

[Capricious]

http://tinyurl.com/2hbocn


"Nov. 14 (Bloomberg) -- The Florida agency that manages about $50 billion of short-term investments for the state, school districts and local governments holds $2.2 billion of debt cut to junk status...."

[Capricious]

More


http://tinyurl.com/25phmz

[SHELLY]

Florida has been "Ground Zero" for feckless investulators, spurred on by subprime mortgages, who helped inflate the state's real estate bubble....isn't it ironic that the state ends up mired it the remnants of its own toxic waste.

The article quotes one school district rube: ``We don't have the time or staff for professional money management. They have lots of investment advisers. It's risk free and easy.''

:roll:

I bet he's glad that it was only the Florida taxpayers' money he pizzed away.


.

[Capricious]

"...It's risk free and easy....''




Well;

At least it was easy.

[SHELLY]

"...It's risk free and easy....''




Well;

At least it was easy.


I'm willing to bet this guy has a preconstruction contract for a Florida condo--or two.



.

[Capricious]

I would have expected more of the "locals" to jump in on
this post.


After all, it's their school money that's being discussed.


I guess they won't mind making it up with higher taxes.

[Smiling JOe]

I would have expected more of the "locals" to jump in on
this post.


After all, it's their school money that's being discussed.


I guess they won't mind making it up with higher taxes.I'm not sure why you expect locals to jump in on this post. :idontno: What do you want us to do, raise hell because of the particular investments the State made? When you leave investments up to the State, the only people who will win will be the friends of the elected officials, who are getting to invest the money. Nothing new there. Just wait until the gov't takes over social security, oh wait a minute... never mind about that one. I mean, wait until the gov't takes over health care. It seems the politicians already have their friends in the drug business, locked in and pumping out pills. Yep, nothing new here with a touch of the investments chosen being downgraded to junk. It's poliTRICKS.

[SHELLY]

I would have expected more of the "locals" to jump in on
this post.


After all, it's their school money that's being discussed.


I guess they won't mind making it up with higher taxes.

Quite frankly, there is nothing we can do except pay what they tell us to pay--or end up buying back our own house on the courthouse steps. :idontno:


.

[Capricious]

Just wait until the gov't takes over social security, oh wait a minute... never mind about that one. I mean, wait until the gov't takes over health care. .



Yes, it is much preferable to have a private company manage the
money rather than the governement.

Might I suggest Citigroup or perhaps Merril Lynch (Pierce, Fenner & Smith)?

The markets are showing confidence in these company's money
management skills:

http://tinyurl.com/35ukkb


Pehaps GE has a desire to manage the money?

Certainly these businesses know how to manage investments.

Anyway, I have no skin in this game so it really doesn't matter to me.

[Smiling JOe]

Yes, it is much preferable to have a private company manage the
money rather than the governement.

Might I suggest Citigroup or perhaps Merril Lynch (Pierce, Fenner & Smith)?

The markets are showing confidence in these company's money
management skills:

http://tinyurl.com/35ukkb


Pehaps GE has a desire to manage the money?

Certainly these businesses know how to manage investments.

Anyway, I have no skin in this game so it really doesn't matter to me.
Those are some of the very friends of politicians to whom I referred as being the only winners. It is my personal opinion that all tax money which the gov't collects should be placed in secured investments only, until used.

[beachmouse]

There is that part in the article that says:

The Florida State Board of Administration said none of its clients have lost money and it has negotiated to recoup its investments. Even so, the board, known as the SBA, said it is decreasing its investments in asset-backed commercial paper by reinvesting elsewhere.



So there is no immediate fiscal crisis, just a very large investor trying to manage a graceful exit, and they've got a chance to pull it off without harm to the taxpayers.

And for all the inconsistencies in Florida state government, their investment pools have actually done a decent job over the years. It's the only state in the country where the state/local public employee pension fund is adequately funded according to current pension guidelines.

[Capricious]

Those are some of the very friends of politicians to whom I referred as being the only winners. It is my personal opinion that all tax money which the gov't collects should be placed in secured investments only, until used.



The question today is exactly what is a "secured investment?"

People used to think real estate was one.

[Smiling JOe]

The question today is exactly what is a "secured investment?"

People used to think real estate was one.guaranteed deposits insured by the FDIC, but you make a good point, as our Fed Gov't could collapse, but then we wouldn't need any money for gov't schools, would we?

[SHELLY]

It's the only state in the country where the state/local public employee pension fund is adequately funded according to current pension guidelines.

Mouse, are you keeping the books?


.

[Capricious]

http://tinyurl.com/yw62ee


``Knowing other people were pulling out, and that word was spreading, we looked at the potential for a run on the pool,'' said Orange County's Moye. .."

[Bob]

SandLs, Enron, Sivs, the sky is falling......again

[NotDeadYet]

Florida Halts Withdrawals From Investment Pool
By THE ASSOCIATED PRESS
TALLAHASSEE, Fla., Nov. 29 (AP) — Florida officials suspended withdrawals from a state-operated investment pool today, abruptly halting a run by local governments spooked over the downgrade of its mortgage-related holdings.
The State Board of Administration, whose chairman is Gov. Charlie Crist, acted during an emergency meeting after local governments had taken out nearly $10 billion, or 40 percent of the pool’s assets, in the last two weeks. That included $3.5 billion this morning.
The investment pool is similar to a private money market fund. Cities, counties, school districts and other local entities invest money on a short-term basis in the fund and withdraw cash when needed to make payrolls and pay other operating costs.
The suspension will remain in effect at least until Tuesday, when the board will meet again to consider proposals for shoring up and restoring confidence in the pool.
The pool had nearly $25 billion in assets when the run began after more than $700 million in asset-backed commercial paper had been downgraded below purchase credit rating guidelines.
“Participants are scared to death,” said Coleman Stipanovich, the board’s executive director. “If we don’t do something quickly, we’re not going to have an investment pool.”
Mr. Stipanovich attributed the run to a news report that characterized the downgrading as a default, which he disputed. At least one local government — Leon County — withdrew its money before the article was published after learning about the downgrade.
“No matter what’s motivating it, whether it’s factual or not factual, it’s almost irrelevant at this point,” Mr. Crist said.
Wayne Blanton, executive director of the Florida School Boards Association, said districts have other assets and lines of credit they can use until Tuesday.
“We can make payroll, but the fact is the purpose of that system is to help us move our money in and out and at any given time — 24 hours a day,” Mr. Blanton said. “Right now they have frozen that ability.”
Mr. Crist and the other board members, the chief financial officer, Alex Sink, and the attorney general, Bill McCollum (http://topics.nytimes.com/top/reference/timestopics/people/m/bill_mccollum/index.html?inline=nyt-per), were worried that without suspending withdrawals, the pool would run out of money because of the downgraded assets. That would leave the last local governments in the pool with nothing.
Mr. McCollum took part by telephone from Utah, where he is attending a meeting of the National Association of Attorneys General.
Mr. Stipanovich proposed using the state’s $137 billion pension fund to secure the downgraded paper, but board members were cool to that idea. They voted, instead, to seek advice from outside financial experts before considering the proposal again Tuesday.
“It’s something that, speaking for myself, I’m not excited about,” Ms. Sink said.
Mr. Crist agreed. He said he did not want to do anything to harm the pension plan and state and local government employees who depend upon it.
Mr. Stipanovich said there would be little risk to the pension plan because the downgraded paper was backed by highly rated mortgages that continue to return millions of dollars in premiums and interest to investors.
Their market value, though, has plummeted because investors are shunning all mortgage-related securities due to losses on subprime mortgages.
Even if they do default, the pension fund would receive the mortgages as collateral and they would continue to pay off, Mr. Stipanovich said. He said they also should regain their market value, although that could take years.
That is no problem for the pension fund, which invests for the long term, but it is for the local government pool because it needs to keep its assets liquid.

[SHELLY]

.
Florida Halts Withdrawals From Investment Pool



ORANGE COUNTY: 1

OTHER COUNTIES: Screwed



“No matter what’s motivating it, whether it’s factual or not factual, it’s almost irrelevant at this point,” Mr. Crist said. (So are you Chuck.)

Mr. Stipanovich said there would be little risk to the pension plan because the downgraded paper was backed by highly rated mortgages that continue to return millions of dollars in premiums and interest to investors. :cool:

(Mr "little risk" Stipanovich was the same dolt that was at the helm and stood watch while the pension fund bought Enron shares at as high as $80 and continued buying as the stock rode down from $43 to 28-cents...then sold all 7.5 million shares at 28-cents a few days before Enron filed for bankruptcy.)





.

[SHELLY]

And then there's this:


"Cities and counties across the state have pulled out of the investment fund in the wake of reports showing that it had invested in companies that could be hurt by the credit crunch and mortgage problems, such as Countrywide. Bloomberg News reported Thursday that most of the investments had been sold to the state by Lehman Brothers, the massive investment firm that recently announced that former Gov. Bush had joined its private equity board." :cool:

(http://smilies.vidahost.com/otn/monsters/GHOST.gifThe Ghost of Floriduh Past)



.

[SHELLY]

...But wait !!!!! There's more!!!!!

"To protect the remaining $15 billion in the investment pool, including $2 billion from Citizens Property Insurance - the largest single account left in the fund :shock: - the Florida State Board of Administration halted further withdrawals until at least Tuesday."

If the pace of recent withdrawals had continued, the state board could have been forced to sell the pool's troubled securities at a deep discount and left some governments with the losses.

"What happens to the participants who have the last $2 billion in the pool?" <:scratch: hmmmm, $2 billion....where have I seen that number before:confused::blink:> Sink said. "They get zero." :shock:


.

[Capricious]

SandLs, Enron, Sivs, the sky is falling......again



Evidently the sky WAS falling.

[Capricious]

They're lined-up at the door.


http://tinyurl.com/2zpg3l

[Capricious]

That was then:

"Nov. 15 (Bloomberg) -- Hal Wilson smiles at the blue numbers on his desktop screen. His money is yielding 5.77 percent. For the chief financial officer of Florida's Jefferson County school board, that means the $2.7 million of taxpayer funds he's placed in the state's Local Government Investment Pool is earning more on this October day than it would get in a money market fund. And Wilson says he knows the Florida officials who manage the funds of the 1,559-student district have invested them wisely..."






This is now;

Nov 30 ``The unthinkable and the unimaginable have just happened here in Florida,'' said Hal Wilson, chief financial officer of the Jefferson County school district, located 30 miles (48 kilometers) east of the state capital Tallahassee. ``What we just experienced here is a classic run-on-the bank meltdown.''

"Wilson at Jefferson County said he plans to withdraw the school district's money from the pool as soon as he can, and won't consider investing there again. "

``They won't have to worry about little Jefferson County any more,'' Wilson said.

[SHELLY]

.
Florida is so screwed.

.

[Bobby J]

.
Florida is so screwed.

.

Been to CA. lately.....

[Capricious]

Been to CA. lately.....





I expect this to hit many states.

[SHELLY]

Been to CA. lately.....

But CA has the "Governator"....and we've only got :roll: "Sorry Charlie."


.

[Bob]

Evidently the sky WAS falling.they'll get their money out of the General Fund.

[dude]

shelly & capricious shouldn't you both go stick your money in a mattress somewhere and be quiet. i recommend you both hibernate for the next 72 years, since these horrible & unbearable circumstances are sure to last for all of eternity. your continuous negativity & innate ability to state the obvious is both boring & galling.

you act is if florida is the only place this is happening. from florida to germany to norway; many have succumbed to the advice of financial planners & have unfortunately lost some money.

but hey its just money & the sky is not falling; perhaps we will have a recession, but millions of americans have a christmas tree with presents, plenty of food in the cupboard, & a number of parties to attend - so all in all things are not so bad, actually pretty durn good.

[wrobert]

but hey its just money & the sky is not falling; perhaps we will have a recession, but millions of americans have a christmas tree with presents, plenty of food in the cupboard, & a number of parties to attend - so all in all things are not so bad, actually pretty durn good.


And our poor have cars, indoor toilets, televisions, and air conditioning. Being poor in America is certainly a step up from the rest of the world.

[SHELLY]

http://www.washingtonpost.com/wp-dyn/content/article/2007/12/03/AR2007120302217.html?hpid=topnews


"In the Monday conference call with Florida's local governments and schools, BlackRock explained that of the $14 billion left in the fund, $12 billion -- or 86 percent -- was in "high-quality" assets. The rest were either securities in default or under stress because of credit issues. The team proposed breaking the fund into two, with one holding the "clean" assets and the other holding the distressed. If a school district had $100 million invested, $86 million would go into the clean fund under this scenario."


--As if Florida isn't already having problems with property taxes and Citizen's Insurance.

--POOF! $2 BILLION dollars goes to Money Heaven (A tightly-packed stack of new $1,000 bills totaling $2 billion would be 126 miles high. In comparison, jet planes fly at 30,000 - 40,000 feet (5.7 - 7.7 miles high).

The irony in the above example is that probably the $120M the State of Florida set aside for the new airport is probably sitting in this fund too.



.

[Capricious]

Just when you think things could not get worse...

http://tinyurl.com/2353eq


"Dec. 4 (Bloomberg) -- Florida's pension fund owns more than $1 billion of the same downgraded and defaulted debt that sparked a run on a state investment pool for local governments and forced officials to freeze withdrawals...."

"Like the local government pool, the pension fund owns debt of a defaulted SIV called Axon Financial, whose credit rating was cut to D from C by Standard & Poor's last week. .."

``These were highly inappropriate investments for taxpayers' money,'' said Joseph Mason, a finance professor at Drexel University in Philadelphia. .."

"Citizens Property Insurance Corp., an insurer created by the state five years ago to provide hurricane coverage to residents in high-risk areas, has half its $10 billion of assets managed by the state board..."




Gradually it will become known that other states are in the same
situation.

Florida is just the first.

[wrobert]

Just when you think things could not get worse...

http://tinyurl.com/2353eq


"Dec. 4 (Bloomberg) -- Florida's pension fund owns more than $1 billion of the same downgraded and defaulted debt that sparked a run on a state investment pool for local governments and forced officials to freeze withdrawals...."

"Like the local government pool, the pension fund owns debt of a defaulted SIV called Axon Financial, whose credit rating was cut to D from C by Standard & Poor's last week. .."

``These were highly inappropriate investments for taxpayers' money,'' said Joseph Mason, a finance professor at Drexel University in Philadelphia. .."

"Citizens Property Insurance Corp., an insurer created by the state five years ago to provide hurricane coverage to residents in high-risk areas, has half its $10 billion of assets managed by the state board..."




Gradually it will become known that other states are in the same
situation.

Florida is just the first.

Greed is an inherent fault of mankind. As we can see, even those in charge are human.

[Capricious]

That was then:

"Nov. 15 (Bloomberg) -- Hal Wilson smiles at the blue numbers on his desktop screen. His money is yielding 5.77 percent. For the chief financial officer of Florida's Jefferson County school board, that means the $2.7 million of taxpayer funds he's placed in the state's Local Government Investment Pool is earning more on this October day than it would get in a money market fund. And Wilson says he knows the Florida officials who manage the funds of the 1,559-student district have invested them wisely..."



This is now;

Nov 30 ``The unthinkable and the unimaginable have just happened here in Florida,'' said Hal Wilson, chief financial officer of the Jefferson County school district, located 30 miles (48 kilometers) east of the state capital Tallahassee. ``What we just experienced here is a classic run-on-the bank meltdown.''

"Wilson at Jefferson County said he plans to withdraw the school district's money from the pool as soon as he can, and won't consider investing there again. "

``They won't have to worry about little Jefferson County any more,'' Wilson said.



Hal Wilson was interviewed on NPR this morning. Wants the "state government" (i.e. taxpayers) to make-up any losses.


Which is, of course, what will ultimately happen.

[wrobert]

Hal Wilson was interviewed on NPR this morning. Wants the "state government" (i.e. taxpayers) to make-up any losses.


Which is, of course, what will ultimately happen.

Of course he does. Because it is his head that people in Jefferson County are going to want if they lose money. People seem to have forgotten that investing is risky by definition.

[Capricious]

http://tinyurl.com/2e54cg


"Dec. 4 (Bloomberg) -- Florida officials led by Governor Charlie Crist approved a plan by BlackRock Inc. to split in two a $14 billion investment fund for local governments, isolating more than $1.5 billion of downgraded and defaulted holdings, as it sought to reopen the pool for limited withdrawals..."

"...Under the BlackRock plan, local governments would be able to take out the greater of 15 percent of their holdings or $2 million without penalty. BlackRock executives estimated the fund, called the Local Government Investment Pool, could reopen as soon as Dec. 6. ..."

[wrobert]

http://tinyurl.com/2e54cg


"Dec. 4 (Bloomberg) -- Florida officials led by Governor Charlie Crist approved a plan by BlackRock Inc. to split in two a $14 billion investment fund for local governments, isolating more than $1.5 billion of downgraded and defaulted holdings, as it sought to reopen the pool for limited withdrawals..."

"...Under the BlackRock plan, local governments would be able to take out the greater of 15 percent of their holdings or $2 million without penalty. BlackRock executives estimated the fund, called the Local Government Investment Pool, could reopen as soon as Dec. 6. ..."

Walton County BCC had about 2.4 million in the fund. They will be taking out 2 million leaving a very small amount in the A fund and about 350K in the B fund. I think they did a pretty good job in this situation. I have always been impressed with Martha Ingle and her employees when it comes to financial matters. I have not heard from the school district as to how much money they had, if any, in the fund.

[Capricious]

http://tinyurl.com/ysprdn

[SHELLY]

In June...in a ballroom...in Las Vegas (and no one saw this coming?):

http://www.bloomberg.com/apps/news?pid=20601109&sid=aW5vEJn3LpVw&refer=news


"At a sales presentation of the bank's CDOs to 50 public pension fund managers in a Las Vegas hotel ballroom, Jean Fleischhacker, Bear Stearns senior managing director, tells fund managers they can get a 20 percent annual return from the bottom level of a CDO. "



.

[Capricious]

In June...in a ballroom...in Las Vegas (and no one saw this coming?):

http://www.bloomberg.com/apps/news?pid=20601109&sid=aW5vEJn3LpVw&refer=news


"At a sales presentation of the bank's CDOs to 50 public pension fund managers in a Las Vegas hotel ballroom, Jean Fleischhacker, Bear Stearns senior managing director, tells fund managers they can get a 20 percent annual return from the bottom level of a CDO. "



.




But they had really good snacks

[SHELLY]

But they had really good snacks

Touche'


.

[wrobert]

From WZEP News:

Some of the local governments possibly affected are:
Walton County Board of Commissioners with $2.3 million
Walton School Board with $14.3 million
Freeport with $106,160.65
Holmes County Board of Commissioners with $49,618.50
Holmes County School Board with $5.3 million
Washington County Board of Commissioners with $597,833.16
Washington County School Board with $11.3 million
Okaloosa County with $62.5million
Okaloosa County School Board with $57.8 million
Okaloosa-Walton College with $9.9 million
Several parts of the Bay County Government, Okaloosa Island Fire and the Cities of Chipley, Bonifay and Crestview. Bonifay has $130,577.32 in the fund, Crestview has $1.6 million.


Walton School District Financial Officer Jim McCall tells First News they have known about the situation for about two weeks and after consulting with other finance officers, accountants and others, the district decided to not withdraw funds. McCall says, with the current tax dollars coming in, they do not need to use the money right away and based on the investment account’s past record, the decision was made to continue with the money in the account, but not deposit anymore until the matter is resolved. According to McCall, the district has been using the investment account for many years and he feels the type of investments will be turned over in a matter of months. McCall also says the money is not tied to the current school building projects or any other financial need where the money has to be accessed right away.

[Capricious]

"..Walton School District Financial Officer Jim McCall tells First News they have known about the situation for about two weeks and after consulting with other finance officers, accountants and others, the district decided to not withdraw funds.."



Give them boys a Gold Star for brillance.

[scooterbug44]

Walton School District Financial Officer Jim McCall tells First News they have known about the situation for about two weeks and after consulting with other finance officers, accountants and others, the district decided to not withdraw funds. McCall says, with the current tax dollars coming in, they do not need to use the money right away and based on the investment account’s past record, the decision was made to continue with the money in the account, but not deposit anymore until the matter is resolved. According to McCall, the district has been using the investment account for many years and he feels the type of investments will be turned over in a matter of months. McCall also says the money is not tied to the current school building projects or any other financial need where the money has to be accessed right away.
Well, as long as we don't need the money right now. :roll: It's not like it could be earning guaranteed interest elsewhere or anything.

[wrobert]

Well, as long as we don't need the money right now. :roll: It's not like it could be earning guaranteed interest elsewhere or anything.


I sat in on a couple of school district budget hearings and this sudden lack of a need for my money is news to me. They made several arguments about just how badly they needed the money and more a few weeks ago. My how things change once it is in the bank.

[SHELLY]

According to McCall, the district has been using the investment account for many years and he feels the type of investments will be turned over in a matter of months. McCall also says the money is not tied to the current school building projects or any other financial need where the money has to be accessed right away.

....i.e., Jim McCall's salary or pension. :roll:

Jim will get a 'Gold Star' from Charlie.


.

[Capricious]

"...Nobody will buy that paper...''



http://tinyurl.com/22p9on

[SHELLY]

.
Jim McCall is a moron if he leaves our tax dollars in this cesspool of toxic waste.

I hope he reads this and does the right thing by getting every penny of the school's money out before more evaporates.


.

[WileCoyote]

We need not forget that Mr. McCall acts only through the authority of those elected to the School Board and the Supt. of Education. It would appear that they have no issue with his decision to leave 14.3 million at "very high risk".
Let me put a name on those titles:

Carlene Anderson - Supt. - Will Stand for re-election in '08
Mark Davis - Will Stand for re-election in '08
Darrell Barnhill
Bill Laird
Sharon Roberts
Mildred Wilkerson - Will Stand for re-election in '08

Light bulbs come in many wattages - some are "bright" and some are very "dim".

Why should they worry anyway ? They will suffer no consequences for their failure to excercise their due dilligence responsibility.

They have almost 7 times the risk that Walton County has and our Clerk of Courts got all she could get back Monday. We will see what happens with the rest, but at least she acted prudently.

[SHELLY]

We need not forget that Mr. McCall acts only through the authority of those elected to the School Board and the Supt. of Education. It would appear that they have no issue with his decision to leave 14.3 million at "very high risk".
Let me put a name on those titles:

Carlene Anderson - Supt. - Will Stand for re-election in '08
Mark Davis - Will Stand for re-election in '08
Darrell Barnhill
Bill Laird
Sharon Roberts
Mildred Wilkerson - Will Stand for re-election in '08

Light bulbs come in many wattages - some are "bright" and some are very "dim".

Why should they worry anyway ? They will suffer no consequences for their failure to excercise their due dilligence responsibility.

They have almost 7 times the risk that Walton County has and our Clerk of Courts got all she could get back Monday. We will see what happens with the rest, but at least she acted prudently.

Well then, might I be so bold as to ask Mr McCall and his little uninformed cabal to tear themselves away from debating useless piffle (i.e., the school play Harvey) and learn a bit about something that REALLY matters:

-------------------------------------------------------------------
From the Washington Post

It's Not 1929, but It's the Biggest Mess Since

By Steven Pearlstein
Wednesday, December 5, 2007

It was Charles Mackay, the 19th-century Scottish journalist, who observed that men go mad in herds but only come to their senses one by one.

We are only at the beginning of the financial world coming to its senses after the bursting of the biggest credit bubble the world has seen. Everyone seems to acknowledge now that there will be lots of mortgage foreclosures and that house prices will fall nationally for the first time since the Great Depression. Some lenders and hedge funds have failed, while some banks have taken painful write-offs and fired executives. There's even a growing recognition that a recession is over the horizon.

But let me assure you, you ain't seen nothing, yet.

What's important to understand is that, contrary to what you heard from President Bush yesterday, this isn't just a mortgage or housing crisis. The financial giants that originated, packaged, rated and insured all those subprime mortgages were the same ones, run by the same executives, with the same fee incentives, using the same financial technologies and risk-management systems, who originated, packaged, rated and insured home-equity loans, commercial real estate loans, credit card loans and loans to finance corporate buyouts.

It is highly unlikely that these organizations did a significantly better job with those other lines of business than they did with mortgages. But the extent of those misjudgments will be revealed only once the economy has slowed, as it surely will.

At the center of this still-unfolding disaster is the Collateralized Debt Obligation, or CDO. CDOs are not new -- they were at the center of a boom and bust in manufacturing housing loans in the early 2000s. But in the past several years, the CDO market has exploded, fueling not only a mortgage boom but expansion of all manner of credit. By one estimate, the face value of outstanding CDOs is nearly $2 trillion.

But let's begin with the mortgage-backed CDO.

By now, almost everyone knows that most mortgages are no longer held by banks until they are paid off: They are packaged with other mortgages and sold to investors much like a bond.

In the simple version, each investor owned a small percentage of the entire package and got the same yield as all the other investors. Then someone figured out that you could do a bigger business by selling them off in tranches corresponding to different levels of credit risk. Under this arrangement, if any of the mortgages in the pool defaulted, the riskiest tranche would absorb all the losses until its entire investment was wiped out, followed by the next riskiest and the next.

With these tranches, mortgage debt could be divided among classes of investors. The riskiest tranches -- those with the lowest credit ratings -- were sold to hedge funds and junk bond funds whose investors wanted the higher yields that went with the higher risk. The safest ones, offering lower yields and Treasury-like AAA ratings, were snapped up by risk-averse pension funds and money market funds. The least sought-after tranches were those in the middle, the "mezzanine" tranches, which offered middling yields for supposedly moderate risks.

Stick with me now, because this is where it gets interesting. For it is at this point that the banks got the bright idea of buying up a bunch of mezzanine tranches from various pools. Then, using fancy computer models, they convinced themselves and the rating agencies that by repeating the same "tranching" process, they could use these mezzanine-rated assets to create a new set of securities -- some of them junk, some mezzanine, but the bulk of them with the AAA ratings more investors desired.

It was a marvelous piece of financial alchemy, one that made Wall Street banks and the ratings agencies billions of dollars in fees. And because so much borrowed money was used -- in buying the original mortgages, buying the tranches for the CDOs and then in buying the tranches of the CDOs -- the whole thing was so highly leveraged that the returns, at least on paper, were very attractive. No wonder they were snatched up by British hedge funds, German savings banks, oil-rich Norwegian villages and Florida pension funds.

What we know now, of course, is that the investment banks and ratings agencies underestimated the risk that mortgage defaults would rise so dramatically that even AAA investments could lose their value.

One analysis, by Eidesis Capital, a fund specializing in CDOs, estimates that, of the CDOs issued during the peak years of 2006 and 2007, investors in all but the AAA tranches will lose all their money, and even those will suffer losses of 6 to 31 percent.

And looking across the sector, J.P. Morgan's CDO analysts estimate that there will be at least $300 billion in eventual credit losses, the bulk of which is still hidden from public view. That includes at least $30 billion in additional write-downs at major banks and investment houses, and much more at hedge funds that, for the most part, remain in a state of denial.

As part of the unwinding process, the rating agencies are in the midst of a massive and embarrassing downgrading process that will force many banks, pension funds and money market funds to sell their CDO holdings into a market so bereft of buyers that, in one recent transaction, a desperate E-Trade was able to get only 27 cents on the dollar for its highly rated portfolio.

Meanwhile, banks that are forced to hold on to their CDO assets will be required to set aside much more of their own capital as a financial cushion. That will sharply reduce the money they have available for making new loans.

And it doesn't stop there. CDO losses now threaten the AAA ratings of a number of insurance companies that bought CDO paper or insured against CDO losses. And because some of those insurers also have provided insurance to investors in tax-exempt bonds, states and municipalities have decided to pull back on new bond offerings because investors have become skittish.

If all this sounds like a financial house of cards, that's because it is. And it is about to come crashing down, with serious consequences not only for banks and investors but for the economy as a whole.

That's not just my opinion. It's why banks are husbanding their cash and why the outstanding stock of bank loans and commercial paper is shrinking dramatically.

It is why Treasury officials are working overtime on schemes to stem the tide of mortgage foreclosures and provide a new vehicle to buy up CDO assets.

It's why state and federal budget officials are anticipating sharp decreases in tax revenue next year.

And it is why the Federal Reserve is now willing to toss aside concerns about inflation, the dollar and bailing out Wall Street, and move aggressively to cut interest rates and pump additional funds directly into the banking system.

This may not be 1929. But it's a good bet that it's way more serious than the junk bond crisis of 1987, the S&L crisis of 1990 or the bursting of the tech bubble in 2001.

-------------------------------

This is the type of toxic waste investment that is eating up our tax dollars we've entrusted to you all.


.

[Capricious]

http://tinyurl.com/yt859y


"Dec. 6 (Bloomberg) -- Schools and towns in a Florida fund that lost half its assets to withdrawals last month say their finances may be squeezed by proposed limits on how much money they can access...."

[Capricious]

"...But let me assure you, you ain't seen nothing, yet...."

"...the bulk of which is still hidden from public view...."



I expected this to get bad, but it may just be even worse.

After the big (2) day run-up in stocks last week, I went
a bit more "defensive" in my investments.

And I keep watching to see from which direction CDO's/CMO's/SIV's etc.
may come at me; 401K, IRA, pension, school district, state/local
agencies. Money Market Funds, Stable Value Funds, Bond Funds.

This stuff is everywhere.

And the only "investment" dropping in value faster is the
"political capital" that Bush once boasted of "earning."

[WileCoyote]

Walton County was recently recognized nationally for operating a "Drop-out" factory at Walton High School in De Funiak Springs.

What do we have to show for 4 years of leadership from the current Supt. of Education? An A+ School system - (no such thing - a PR spin by the Supt.)

A new Elementary school in "Mossy Head" at a cost of $15 Million and a new High School in De Funiak Spring for abot $30 million and a "good chance" of loosing 14 million due to their lack of understanding of the current financial markets.

We have a sub-prime disaster headed our way with sub-prime leadership.

[wrobert]

Walton County was recently recognized nationally for operating a "Drop-out" factory at Walton High School in De Funiak Springs.

What do we have to show for 4 years of leadership from the current Supt. of Education? An A+ School system - (no such thing - a PR spin by the Supt.)

A new Elementary school in "Mossy Head" at a cost of $15 Million and a new High School in De Funiak Spring for abot $30 million and a "good chance" of loosing 14 million due to their lack of understanding of the current financial markets.

We have a sub-prime disaster headed our way with sub-prime leadership.

Recent information I have seen from the school district shows that your construction estimates need to be revised upwards.

Mossy Head Elementary $21 million
Walton High School $38 million

[WileCoyote]

Are you sure of those numbers ? Got to be wrong ! If you are correct it's worse than I thought. Guess we will be paying for these for many years to come. Oh wait we also need a new Middle School in South Walton - gotta add that to the tax bill for 20 years as well.

[wrobert]

Are you sure of those numbers ? Got to be wrong ! If you are correct it's worse than I thought. Guess we will be paying for these for many years to come. Oh wait we also need a new Middle School in South Walton - gotta add that to the tax bill for 20 years as well.

Those numbers came from Wayne Miller, Asst. Super of the District. But the great thing is that the two schools will be paid for when we move in. Walton County collects enough taxes to do 'pay as you go'. By keeping capital taxes high, those of us who live here now can build the schools that future populations are going to need. No need in asking people that move here to assist with education infrastructure. I guess this is not a problem if taxes were to be dropped after all of this construction is done, but government tends to find a place to spend money that it collects.

[WileCoyote]

Makes sense - tax the help out of me to pay for schools we will be needing in the future. Been paying for schools for 53 years and my last daughter graduated 28 years ago. It would seem that those currently making the decisions have no reguard for the current climate. We need to throw all of them over the side of the ship. Wish I had someone I could tax so I could have a paid for house when I move in.

Noticed on my tax bill when I paid it the other day I pay more to the school system than for roads, police, fire combined.

Poor leadership, poor schools, poor choices in the past.

[SHELLY]

But the great thing is that the two schools will be paid for when we move in. Walton County collects enough taxes to do 'pay as you go'.

Were these numbers crunched by the same brain trust that had the opportunity to get out of the Florida Toxic Cesspool with all our money in tact and chose not to?

/Skepticism Off

.

[wrobert]

I spoke to Martha Ingle last night and the BCC has withdrawn the maximum allowed from the funds. They are now exposed at about $300K. I have not heard anything different from the school district.

[WileCoyote]

Hey -WaltonGOP - you seem to be well connected. I am going to try and start a "Holiday Fund" for all of the poor government workers in Walton County that have been overlooked by their governing body. The Goal is to raise sufficient dollars to give every public employee a "Holiday Gift"

How many "full-time" employees are their in Walton County that work for the Sheriffs Office, All BCC Empoyees, School Board Employees and all that work for the Tax Collector, Supervisor of elections, Property Appraisor. Would it be close to 3000 ?

[wrobert]

Hey -WaltonGOP - you seem to be well connected. I am going to try and start a "Holiday Fund" for all of the poor government workers in Walton County that have been overlooked by their governing body. The Goal is to raise sufficient dollars to give every public employee a "Holiday Gift"

How many "full-time" employees are their in Walton County that work for the Sheriffs Office, All BCC Empoyees, School Board Employees and all that work for the Tax Collector, Supervisor of elections, Property Appraisor. Would it be close to 3000 ?


That sounds reasonable. I know most of them and all are dedicated individuals that would do anything in the world for you. When you get it set up, let me know, while I am certainly not in favor of the government taking my money by force and gifting it to others, I am for showing my appreciation and will gladly make a contribution to the cause.

[SHELLY]

That sounds reasonable. I know most of them and all are dedicated individuals that would do anything in the world for you. When you get it set up, let me know, while I am certainly not in favor of the government taking my money by force and gifting it to others, I am for showing my appreciation and will gladly make a contribution to the cause.

I dropped my "contribution" off at the Walton County Tax Collector's office on November 29th.


.

[wrobert]

I dropped my "contribution" off at the Walton County Tax Collector's office on November 29th.


.

So you added an additional $100 to your taxes or you are in favor of the government seizing money and redistributing it rather than voluntary contributions?

[Capricious]

http://tinyurl.com/yp4n7h

[Capricious]

http://tinyurl.com/2fj9fh

[Capricious]

http://tinyurl.com/3atpy9




"Joseph Mason, a former U.S. Treasury official and now a finance professor at Drexel University in Philadelphia, says Wall Street had few takers for its subprime-tainted debt. ``When they couldn't sell it to more-sophisticated investors, they found less-sophisticated investors like local government investment pools,'' he says. "





"Two years ago, Florida's pool held safer debt investments. On Sept. 30, 2005, 25 percent of the pool was invested in U.S. Treasuries and debt issued by U.S. agencies, the safest and most liquid debt sold. The rest was in short-term corporate commercial paper. Interest rates were low, and fund managers for about 100 such pools in the U.S. wanted higher yields.

Florida was more aggressive than most states. In October, the Florida pool had the highest return of any public fund in the U.S., with a return of 5.63 percent. Chasing higher yields not only meant potentially higher returns for taxpayers; it could also mean bonuses for Stipanovich and his colleagues.

`An Outstanding Individual'

The state gave Stipanovich and pool manager Michael Lombardi financial incentives of up to 8 percent of their annual salaries if they could increase returns for the state's pension fund.

Lombardi bought many of the same tainted debt investments that had helped raise the pension fund returns for the state's money market pool, state records show. Pension funds across the U.S. offer managers bonuses.

Stipanovich, who ran the State Board of Administration which manages $184 billion, was hired in 2000. Two of his three personal references came from then-Governor Bush's top aides.

``An outstanding individual capable of significant contributions to the board,'' Sally Bradshaw, Bush's chief of staff, wrote about Stipanovich."

[wrobert]

Did you see what this new investment firm is charging to straighten this mess out.

From the Orlando Sentinel:

The SBA charges hundreds of governments, including many in Central Florida, 1.5cents per $100 to manage the money sent to it.

BlackRock is charging the state two different fees, 7.5cents per $100 and 39cents per $100, because it split the so-called Local Government Investment Pool.

[SHELLY]

Did you see what this new investment firm is charging to straighten this mess out.


Maybe they should have Stipanovich pay the difference from the bonus money given by taxpayers and the kickbacks he no doubt received from investment bankers--that is, after he does a perp walk.

I won't hold my breath--Floriduh politicos and taxpayers as a whole are pretty clueless when it comes to anything dealing with finance.


Case in point: (Dec. 17 (Bloomberg) -- Florida towns and schools deposited more than they took out from a state investment pool today, the first time the fund has grown since officials lifted a freeze on accounts to stem a run on assets.


.

[Capricious]

Case in point: (Dec. 17 (Bloomberg) -- Florida towns and schools deposited more than they took out from a state investment pool today, the first time the fund has grown since officials lifted a freeze on accounts to stem a run on assets.




Reminds me of a divorced couple I knew.

He cleaned-out the bank account and left.

The next week she deposited her pay check into the same account.

Two days later he cleaned the account out again.

[wrobert]

Maybe they should have Stipanovich pay the difference from the bonus money given by taxpayers and the kickbacks he no doubt received from investment bankers--that is, after he does a perp walk.

.

I missed the story on kickbacks. Can you give me a source?

[Bob]

nasty stuff Mr. Jeb.....you couldn't just retire, could you?