De la sartén al fuego: la saga de un estado en el desplome financiero
December 4, 2007 (LPAC)-- Just as the state of Florida was resolving the issues that would allow it to reopen the frozen state investment pool of municipal funds, it was revealed that the entire state's finances are infected with the same virus, and could thereby suffer the same fate.
The state's Local Government Investment Pool has been frozen since last Thursday, after it suffered a run on its funds that cut the $27 billion pool almost in half to $14 billion. The run was triggered by the revelation that the pool had invested in Axon Finance, an SIV which Standard & Poors downgraded from "C" to "D" (below investment grade) rating last week, because of its exposure to the sub-prime mortgage market. Today, after a meeting of the supervisory State Board of Administration and a 16 member "advisory panel" representing the municipalities, it was decided to split the fund in two, in order to isolate the "toxic" segment, and thereby set the stage for its reopening. In this way, local governments could have access to funds, needed for payroll for teachers, police and other administrative services.
The plan was the brainchild of BlackRock, Inc, who had been hired as consultants by the state, after it instituted a freeze on the pool November 29. BlackRock's solution, isolating more than $1.5 billion in funds, over 10% of its remaining assets, has supposedly left a "clean" fund in which municipal leaders can once again have confidence. The fund is now expected to be unfrozen by Thursday.
Just as this panic run on the bank was being resolved, it was announced that the Florida Retirement System, the state's pension fund, administered by the same State Board as the Pool, has $1 billion (out of $138 billion) of its assets invested in the same Axon Financial, as well as other funds which were likewise downgraded. In addition, Citizens Property Insurance Corp, which was set up by the state for hurricane relief about five years ago, has its feet in the same quicksand, and, according to Bloomberg News, so does the state's central treasury, although they stopped buying SIV-tainted debt last month.
If its starting to dawn on you that this looks less and less like a housing crisis, and more like a national crisis, then you are beginning to see the motivation behind Lyndon LaRouche's Homeowners and Bank Protection Act. An article in today's Orlando Sentinel says that the great debate is no longer "whether" the downturn will affect the broader economy, but "how severe and long-lasting" it will be. "We are looking at a 50 [percent] to 60 percent work-force reduction for home builders," Steve O'Dowd, president of a local home-builder, told them. "That is moving through the whole supply chain that feeds the industry. That could have a massive affect on the economy."
Only action on a federal level, by a Congress responsible for the General Welfare of the Nation, can prevent the cancer from spreading.
