Wednesday, November 14, 2007

Florida Agency Holds $2.2 Billion of Debt Cut to Junk Status

November 14, 2007 - Bloomberg reports that 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 that was cut below investment grade. Florida rules require the state's short-term investments to only be top-rated, liquid securities, so taxpayer funds aren't placed at risk.

Former SEC Chairman weigh in...

``Investment of public money needs to be carefully conducted and thoroughly researched,'' said Harvey Pitt, former chairman of the U.S. Securities and Exchange Commission. ``This is not the place for seat-of-the-pants judgments. It requires a lot more than jumping on the latest investment du jour to improve your results.''

Florida isn't the only government whose short-term investments have been affected by rising mortgage defaults in the U.S. and investors' diminished appetite for the securities tied to them.

``I think there are other communities that are going to follow, probably a lot of them,'' former U.S. Securities and Exchange Commission Chairman Arthur Levitt said today in an interview.

``I think we've got to pay more attention,'' Levitt said. ``They're playing with pensioners' money. That's serious. That's more serious than a brokerage firm or a bank losing money on a bad bet. We're talking about pension losses, and I think the fact that this is spreading is something that we've got to watch very, very carefully.''

According to the report, nearly 1,000 school districts, cities and counties invested in the fund, and have now been informed of its downgraded debt. Click here for full article.

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