Florida Screws Up Easiest Asset Management Task
Someone, or someones plural, at the state of Florida's treasury got greedy, just like any number of financial institutions and investors, and tried to scratch out a little extra money from the state's short term funds. Turns out they bought riskier paper than they thought. At least that is the tenor of the first 99% of the reporting. Notice how these funds merely "consist" of default-prone financial products, not that they were willingly purchased. Nope, they just magically consist or were sinisterly placed there - the article tells us clearly who did the selling, Lehman Bros., but subtley avoids saying that anyone did any buying. Not until you get to the last sentence do you hear the other side of the story: ``The state appears to have breached the trust of the investors by putting money in new kinds of debt its managers didn't fully understand, in their search for higher yields,'' Mason said.
It is inconceivable that Florida's financial administrators did not know what they were buying. More likely is that they were cutting corners or seeking personal advancement on the taxpayers tab. But when you cut corners on a $42 billion dollar base, paying the piper is still expensive. Sadly, this isn't rare. Managing short term funds is easy, but the government manages to screw even that up. But hey, sign me up for that National Health Care System and that Save the Earth from Global Warming stuff.
UPDATE: The state has suspended further withdrawals. Wow, imagine if you had money in what was supposed to be a super-safe, short term money market fund and the manager made risky bets, lost a good chunk of your money and refused to let you fire them by withdrawing your money. It would be enough to get you enraged, enough for you to decry markets and free enterprise, enough for you to demand regulation by the government...oh wait. One thing I don't get is this Stipanovich guy, representing the state, says "If we don't do something quickly, we're not going to have an investment pool." My answer, "So what." It is clear that the state wasn't all that good at managing the pool and failed its customers. Why then should they be allowed to continue in that role? What right do they have to operate this pool after its failure? Counties and municipalities can readily go out and find asset management options, why do they need the state? Let the state pool liquidate, I say.
It is inconceivable that Florida's financial administrators did not know what they were buying. More likely is that they were cutting corners or seeking personal advancement on the taxpayers tab. But when you cut corners on a $42 billion dollar base, paying the piper is still expensive. Sadly, this isn't rare. Managing short term funds is easy, but the government manages to screw even that up. But hey, sign me up for that National Health Care System and that Save the Earth from Global Warming stuff.
UPDATE: The state has suspended further withdrawals. Wow, imagine if you had money in what was supposed to be a super-safe, short term money market fund and the manager made risky bets, lost a good chunk of your money and refused to let you fire them by withdrawing your money. It would be enough to get you enraged, enough for you to decry markets and free enterprise, enough for you to demand regulation by the government...oh wait. One thing I don't get is this Stipanovich guy, representing the state, says "If we don't do something quickly, we're not going to have an investment pool." My answer, "So what." It is clear that the state wasn't all that good at managing the pool and failed its customers. Why then should they be allowed to continue in that role? What right do they have to operate this pool after its failure? Counties and municipalities can readily go out and find asset management options, why do they need the state? Let the state pool liquidate, I say.
posted by Donny Baseball at 11:19 AM
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