Monday, December 3, 2007

Florida Soaks Up the Fund

We've already heard from Gadfly about how the subprime fallout is affecting local governments in foreign countries. But, I don't think any of us will be surprised to find that right here in Florida not only do we have a real mess on our hands with the State's Pension investment fund, we also have a probable Bush scandal - again - involving Jeb Bush.

The story broke last week when local governments started a run on the Florida's invesmtent account due to massive defaults.

Florida's Orange County was among the earlier investors to withdraw its $370 million when they heard reports of the fund's risky investments. "We had been feeling some discomfort with things in the market, and when we couldn't get good answers from the SBA, we felt we had other options and needed to take care of ourselves," says Chief Comptroller Martha Haynie. "The state's going to have to do a lot of work to get us back. My responsibility is to Orange County and not the state pension fund."
Today, we learned the real damage: the state's pension fund had almost $3 Billion - over 15% of total holdings - in mortgage investments!!!! Worse, almost a third of that, $847 million, has already defaulted. This fund, by the way, provides pensions for most law enforcement agencies in the state as well as for every state employee.

But, as bad as that is, the Forbe's article points us to the Bush connection: Jeb Bush was head of the three-person oversight committee who chose investments while he was governor of Florida. Guess you must have figured out that Bush now works for the company that sold Florida most of these crappy investments.

[keep reading]

According to Forbes, Lehman Brothers sold the mortgage investments to the state and now employs Jeb as a consultant.

Lehman spokesperson Kerrie Cohen, speaking on behalf of Bush, said they had no comment and would not say when the bank had sold Florida the paper. SBA did not return calls.
(By the way, I checked every major newspaper in the state and not one mentioned the Bush connection, even though the story is headlines in most of them.)

It's not difficult to figure that the investments were made before January 2007 when Governor Crist took office. The amount is just too large and the investment too ridiculous to have been made during that time. As Jeb had the previous eight years of oversight, he had direct control over what investments were made by the State's pension fund. In Florida, what Jeb wanted, Jeb got so don't think for a minute the other two people on that committee did anything but exactly what he wanted.

While Florida and its local governments try to find ways to deal with the fallout over another Bush mess, Jeb got his payback in August. Unfortunately, it's the taxpayers of Florida who'll be tasked with bailing us out of this mess but that's not a surprise. It's the Bush legacy to run up the expenses on the backs of taxpayers - present and future. Jeb just lived up to the family name.