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Dec

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Is Alex Sink - Florida’s Virginia Woolf ?

Florida sure is grabbing all of the wrong headlines lately.For months we have heard about the Real Estate slump nationally, but Florida continues to get bad press. Yeah we all know we are in the running for the lead with Nevada and California on the number of foreclosures. We have also lead in home builders and mortgage companies going out of business.

Here in Tampa we have also observed more than our fair share of horror stories about unscrupulous Mortgage Brokers and their antics. Now we have to deal with yet another fiasco that is somewhat related.

On November 29th, 2007 at a special meeting of the Trustees of the Florida State Board of Administration, it was decided to put a freeze on all deposits and account withdrawals on Investment funds until another meeting that is supposed to take place on December 4, 2007.

This was done partly because of a run on the funds perpetrated by local city and county governments and some school district throughout Florida. The entities mentioned have been pulling the money out in larger amounts than normal. Some speculate, out of their fear of insolvency and the very real fact that $6 Billion of the $27 Billion dollars in the fund is invested in subprime mortgages.

The SBA or Florida State Board of Administration runs a Local Government Investment Pool (LGIP) that was established to provide local governments with a low cost, low risk, fully transparent investment option for their surplus funds.

This entire subprime mortgage issue has been in the headlines for months now. So I have a few questions that I hope get answered soon.

When did the State Treasury know about this?

The fact that so many city and state governments depend on those funds and now they have to question the availability and stability of those funds.

Why this was never addressed until now?

There is guilt a plenty to go around and some not too clear heads involved at this point. Already we have heard from various local school board officials demanding that the money they take out be provided at 100%.

On our local Tampa Bay home front that would be Mary Ellen Elia, the Superintendent of Hillsborough County Public schools who made the following statement:

“The very fact that you’re out here talking to us about taking less than 100 percent is in my mind unacceptable, you need to figure out how to make the taxpayers in Florida whole. It isn’t going to be fixed by asking us to take less than what we put in there.”

Of course I can understand her frustration since they have $573 million tied up in the pool, more than any other school district. _{(Bloomberg.com covers all the key players in an article entitled “Florida Governments Reject Idea of Accepting Losses on Pool.”)}

Now I would like to have my money invested in a fund that guaranteed a 100 solvency on pay out no matter what happened to the fund.

Let’s get real here ! I don’t think the Tax Payers (yes that’s me too) should have to foot the bill here, however if the State puts more funds into this, where do you think that money is going to come from ?

Even though the State of Florida appears to have lost a few teeth lately, I don’t think it will arrive from the tooth fairy?

What everyone forgets is that this money is in an investment pool and sometimes things go bad. Or did they all forget that? Remember the explanation of the fund. Low cost, low risk. Notice that it does not say NO RISK.

So now we looking at the bickering and arguing going between the State and local government officials whose job it was to mind the money in the first place. It very much reminds me of the Broadway play - Who’s afraid of Virginia Woolf? There is a bitter marriage battle about to ensue between husband and wife and I fear that Virgina Woolf in this case, is starting to look a lot like our State Treasurer Alex Sink and the Husband may turn out to be the City, County and School Government officials. Of course I could have the roles? reversed here.

What is interesting to note as this story unfolds is who knew what when and why did they wait till now for this situation to get out of hand?