Comments on: Three Japanese Banks Asked to Back SIV Rescue Fund And Decline http://www.nakedcapitalism.com/2007/12/three-japanese-banks-asked-to-back-siv.html Sun, 22 Nov 2009 20:29:01 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Anonymous http://www.nakedcapitalism.com/2007/12/three-japanese-banks-asked-to-back-siv.html#comment-2389 Anonymous Thu, 13 Dec 2007 06:33:00 +0000 http://www.nakedcapitalism.com/2007/12/three-japanese-banks-asked-to-back-siv-rescue-fund-and-decline/#comment-2389 The Florida state investment pool announced that it will withhold payment of the $95M of interest earned on the funds in November, rather than pay it to the municipalities and school districts that own an interest in the pool. The decision was made to attempt to preserve the value of the fund, which has declined by an undetermined amount on losses on SIVs in which the pool invested.<br/><br/>The counties and school districts, which used the funds as a cash account they could tap to meet expenses, protested loudly. Orange County – home of the state’s third-largest city, Orlando – will miss out on up to $800k in income for the month. The county’s controller said, “We thought we’d earned interest for the month … we don’t see any regulation that allows them to do that.” Investors are calling on the state to step in, but with lower income and property tax receipts due to the housing slump in the hard-hit state, it can ill afford to do so.<br/><br/>Wachovia has offered loans to the schools and counties that want to withdraw additional funds, but they will incur undisclosed interest charges if they take the deal. Given that they’re already giving up interest income, most are reluctant to add interest expense to the hit they’re taking. The whole mess reiterates the point we made yesterday regarding the lesson from the Florida run: the first investor out is made whole.<br/><br/>https://www.cnbsnet.com/www/MarketUpdate.asp?id=1474&lid=2 The Florida state investment pool announced that it will withhold payment of the $95M of interest earned on the funds in November, rather than pay it to the municipalities and school districts that own an interest in the pool. The decision was made to attempt to preserve the value of the fund, which has declined by an undetermined amount on losses on SIVs in which the pool invested.

The counties and school districts, which used the funds as a cash account they could tap to meet expenses, protested loudly. Orange County – home of the state’s third-largest city, Orlando – will miss out on up to $800k in income for the month. The county’s controller said, “We thought we’d earned interest for the month … we don’t see any regulation that allows them to do that.” Investors are calling on the state to step in, but with lower income and property tax receipts due to the housing slump in the hard-hit state, it can ill afford to do so.

Wachovia has offered loans to the schools and counties that want to withdraw additional funds, but they will incur undisclosed interest charges if they take the deal. Given that they’re already giving up interest income, most are reluctant to add interest expense to the hit they’re taking. The whole mess reiterates the point we made yesterday regarding the lesson from the Florida run: the first investor out is made whole.

https://www.cnbsnet.com/www/MarketUpdate.asp?id=1474&lid=2

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