One of the odd coincidences of the Florida LGIP situation...

Florida property taxes are billed to the property owners around Oct 31st, based on the property appraisal in force the most recent Jan 1st. Property owners have begun paying their taxes over the last 3 weeks or so. They have until March 31st, IIRC, before the taxes are considered delinquent. So some counties may be able to squeak by based on the receipts coming in the door day-to-day. Some of the early tax receipts may have been just sent to the LGIP.

Talahassee Democrat: Managers work on solutions for $14 billion frozen in fund
Here are the top 20 accounts by dollars still in the pool. Source: State Board of Administration.

Miami-Dade Community College, $146 million

Thats $1.4B of Hillsborough County (Tampa) money frozen !

Note that Jefferson county (mentioned repeatedly by Bloomberg) isn't in the top 20.

Orlando Sentinel: Funds frozen, but Central Florida agencies aren't panicking

Orlando Sentinel: Central Florida list of frozen funds by agency

St Pete Times: State plugs drain on fund

Pinellas County, for example, removed its entire $290-million investment Nov. 20 and parked the money in a bank money-market account. St. Petersburg has withdrawn $104-million since Nov. 16, leaving just $4-million. St. Petersburg finance director Jeff Spies said local governments may not have been acting rationally when they pulled their money but rather reacting to fear and pressure from negative media coverage.

Yet the broader run on deposits created a self-fulfilling prophecy that temporarily put them at peril. If state officials had allowed the run on deposits to continue Thursday, the fund's managers may have had to sell some or all of the mortgage-backed securities at fire-sale prices. Holdouts like Hillsborough County could have suffered losses.

"Those people who got their $3.5 billion today are darned lucky. Is that fair?''

As someone recently said,

THE FIRST RULE OF PANIC IS:

"Be the first to panic."

Ummm, so the panickers should have gone down with the ship? Capital flight in the good ol' US of A. Who woulda thunk it?

IMHO, withdrawals should have been staggered, especially for anyone that had a material portion of the fund. That way the pain could have been shared equally. As someone else pointed out in an earlier thread, there was no FDIC insurance on this type of pool (not to mention that the balances were way up there compared to $100K).

The fund had a balance of about $27B. They have had a recent outflow of somewhere in the $10B-$12B range. That one article implied that the current shortfall could be in the $2B range. Based on current assets ($15B ?) that would be a 13% haircut for everyone remaining. Had it been proportionally distributed in the beginning, the haircut would have been more like 7.4%. For a county like Hillsborough (having slightly more than $1.4B still on deposit), the difference is between a $104M and a $182M haircut. So HIllsborough stands to loose $78M by doing the right thing and holding firm.

Somewhere in one of those articles it mentioned that there were ~900 accounts in the LGIP. That is way more than I was expecting. I guess every elected official in each of the 67 counties had the option to participate (which could be 5-8 per county) plus the school districts and the water management districts.

Another thing that caught my eye was this remark...

Pinellas County, for example, removed its entire $290-million investment Nov. 20 and parked the money in a bank money-market account.

uhhhh... I hope they are paying very careful attention to the what backs that MM account (cause FDIC, even it were applicable, sure isn't going to cover $290M).

From "risk free and easy" to "classic run-on-the bank meltdown" ...

I offer a few charts of fear minus greed, for those interested.

California gives all clear:
California 'pooled' funds said to be on solid ground - Los Angeles Times
managers of the California funds say they own little or none of the kind of dicey short-term IOUs that have sent investors fleeing from the Florida fund, causing authorities there to halt withdrawals Thursday.

I glanced through their quarterly report (PDF warning):
http://www.treasurer.ca.gov/pmia-laif/reports/quarterly/200709.pdf

And saw:

COUNTYRYWIDE $20 million
COUNTRYWIDE $20 million
COUNTRYWIDE $9 million

(First one has a typo: I don't know if it was "accident" or not. What's in your portfolio?)

S&P gives almost all clear:

"S&P says credit squeeze spares investment pools"

Business & Financial News, Breaking US & International News | Reuters.com

Massachusetts said its short-term fund had invested in several SIVs, but none of the investments had any problems and there have been no redemption issues. YET

Connecticut's $5 billion short-term investment fund has a $100 million SIV investment that has stopped interest payments but local governments have not been pulling money out of the fund YET!

When will Florida redemption story hit local newspapers?

I could be the perma bear in illogical verging on insane comfort.

If I'd said a year ago or even 6 months ago that 2 states schools systems would be threaten with being unable to pay their teachers and staff because of a financial meltdown, I'd either would have checked myself into the loony bin or would have been driven to it. - vader

Remember the early days on Monster IT Forum from say just before Y2K until after dot.bomb was in full bloom and they shut it down because of the 'negative tone'?

Tell'em how you got the handle 'vader'.

How many folks we knew lost a half decade of income? Or their homes & families?

And what was really funny - in hind sight - were all the displaced IT guys back then saying they should have gone into the trades instead of IT... "people always need carpenters & plumbers - folks are always building houses". Remember that?

I wonder how many did and where they are now with housing starts going to ?????

Shit never changes... same old same old.

Here in Oregon, counties also have investment pools, with funds in ABCP, CD's, CDO's, MM's, as well invested in the state investment pools. The funds are fully "collateralized," or so our county treasurer assured me two months ago. At which point our small taxing district pulled out half our funds and put them into a bank CD.

New taxes are now coming in, so yesterday we pulled out half of the new funds for yet another CD.

Yes, we are some of the smart ones who panicked early. But frankly, I think we here are just getting a hint of how much questionable paper is held by government pools (state, county, and probably municipal). If runs on such funds materialize, everything else talked about on this RE blog is irrelevant. Because, if government entities can't pay workers and pensioners, equity and bond and RE markets just don't even matter; the whole fabric of society will disintegrate fast. Most Americans exist paycheck to paycheck.

Do you suppose feds will allow that without a hyperinflationary bailout? I don't. And that's the end of the deflationary credit collapse.

Vader came about when the bulls nicked named me that because I was so negative, I.E. from the dark side. That in the day before CR, Angry Bear and all the other economic blogs. I'd pull interesting tidbits from news sites and Prudent Bear into Monster and later UnemployedIT to prove my points.

Lots of IT folks also went into mortgage brokers.

Plumbing is good unless everyone tries to crowd into it. If the standard for wages continues to be India for intellectual work, then folks will look for almost anything else and will crowd into the 'trades' which with the illegals will crash as far as wages are concerned.

If new construction crashes, duh, then there will be much less work building stuff and repair stuff can be done by the average joe, esp if he is making $10 an hour, even spending a day fixing the wax seal on a toilet, for example, is cheaper than calling a plumber.

Stuff like Electrical and HVAC can even be affected by folks with no front office, working out of their home and buying the stuff ad hoc and charging way under market.

risk capital

"`You need to figure out how to make the taxpayers in Florida whole"

Just how is that going to happen? Sell the managers for body parts?

Or charge admission to watch their execution in a sports stadium?

Back in the days of the dot com bomb, folks that had stock options that were exercised while the stock was high flying often ended up paying taxes when the stock was zero because tax liability attached at the time of exercise.

Yes. When my options vested (in '98 and '99) it was 'vest, exercise and sell' time (as fast as possible). I watched the stock go up another few pct past where I got out and didn't shed one tear.

If the Florida LGIP depends on tax revenue to remain solvent (before the fire sale), what will happen when the tax revenues decline?

I think you may have the cart before the horse. Tax revenues were a source of funds being invested in the LGIP. It was a coincidence of timing that new property collections may have just started to arrive at the fund. The local county tax collectors can easily stop making deposits to the fund (and in fact the fund has ceased accepting deposits until next Tuesday).

The solvency of the fund is at risk because of the 'bank run' nature of the withdrawals even more than the quality of the paper held.

As someone recently said,

"Be the first to panic."

This is/was a cooperative pool of investments. This was not set up for the participants to trade against one another. This was set up to 'pool' all these funds together and do some better investing. The guys who panicked first, effectively screwed the ones who held back. Had this been a "stock market trading floor where I'm trading against you" situation, then it certainly would been correct (and expected) behavior.

Florida panel refuses 0.90 NAV

A newly formed advisory panel composed of Florida school and local government officials with money frozen in a state-run investment pool said they won't accept a return of less than 100 percent of their investment.

Members of the new panel, on a conference call late yesterday with officials from the agency that runs the fund, rejected a proposal to survey pool participants to determine whether they would accept as little as 90 cents on the dollar of their deposits in order to access their money in December

Florida Governments Reject Idea of Accepting Losses on Pool - Bloomberg.com

http://calculatedrisk.blogspot.c...in- suckers.html

I remember that one. Anyone that bought this garbage should be sacked! Caveat Emptor.

So who is going to make good on all the mortgage backed FHLB advances? S&L Squared I suppose.

Estimates May Have Overstated Job Growth

The new report concluded that personal income from wages and salaries grew at an annual rate of 1.6 percent in the second quarter, far below the 4.5 percent that had previously been estimated.

Estimates May Have Overstated Job Growth - NY Times

So, anybody have any other theories on what's going to hold up consumer spending? Other than credit card debt?

War spending seems to be holding up nicely. We can't afford to stop blowing stuff up now, the economy couldn't handle it. Maybe a third war would kick start the markets?

The employment situation this year has been confused by a sharp difference in the two surveys the government releases each month. Through October, the payroll survey estimated that 1.2 million jobs were added to the American economy.

The household survey, which is based on talking to a sample of workers, has shown a decline of 72,000 jobs so far this year.

“This tells us the payroll number is truly flawed,” Mr. Barbera said. “The number the Fed has to key on is the household time series.”

This is what I've been saying for months. The household survey has been consistently flashing a warning sign of a deteriorating economy, led by flat job growth. But all the MSM and market have wanted to focus on has been the payroll survey. The payroll survey should never be taken seriously again.

Contrary to what even CR has said, there has been no job growth in the U.S. economy in 2007. It's been a big illusion.

I smell a "state pension fund implode-o-meter" coming on.
edgar

Make it a money market fund-o-meter.

I think that the contagion in weeks ahead will involve non-state fund money market funds, including retail.

dc1000 -

Do I detect a mood shift?

Are you the same dc1000 thank was posting 6 months back?

Or was that your evil twin?

Excuse me. What the F*&% are they doing thinking of buying a new car.

Are you kidding? The 2008 models are out! How can you not want a new Hummer?

It occurs to me I haven't seen a "Let them eat cake" paraphrase yet. Surely that is on the way from some clueless government official.

Don't say I didn't warn you, in simple, easily-grasped terms.

Sure you did. Thus far, all the hullabaloo is about operating fund accounts. So far, I've heard nothing about the Florida Retirement System fund (also under the Florida BoA) being in a similar situation (although one might wonder at this point).

SBA
The SBA, a constitutional entity of Florida state government, manages 30 investment funds, comprising over $184 billion in assets under management as of June 30, 2007.

If you follow the link to Local Government Investment Pool, then click on Holdings (bottom right), it beings up a pdf file that lists where the money was invested as of the end of October. This conveniently includes Cusip #'s, rates, maturity dates, par value and cost.

I see utilities, IBs, Insurance companies, etc. A few names I recognize from recent news: KKR Atlantic, KKR Pacific, Ottimo, and Countrywide.

if you want to live outside of beulaville,nc you can rent a farmhouse for $250 a month

Hapsburger, dc1000 has always been realistic, just telling us what he personally sees, and not claiming it to be representative of the nation as a whole -- or even DC's immediate surroundings. I've greatly appreciated his reports.

As for cheap credit card money- why not take it and put it into six month cds? Think of it as advanced forced savings with a nice bit of leverage;-}

The credit cards have all buried a 3% cash advance fee in the fine print. I guess enough people figured out the credit card arbitrage thing.

There is an opportunity for HELOC arbitrage. The spread between HELOC rates (prime-1) and the interest rates some banks/credit unions are paying is small enough that you can make money after taxes.

The limit is 100K and you need to make sure you aren't going to get hit with AMT. There are probably some other tax implications IANATG (I Am Not A Tax Guy).