Wednesday, November 28, 2007

Just Think!

If Social Security were privatized, and your retirement money ended up in something like this, you could end up with...nothing! Bloomberg (11.28.07):
"Florida local governments and school districts pulled $8 billion out of a state-run investment pool, or 30 percent of its assets, after learning that the money-market fund contained more than $700 million of defaulted debt."

Florida School Fund Rocked by $8 Billion Pullout Amid Defaults

In a nutshell, the "State Board of Administration manages about $42 billion of short-term investments, including the pool, as well as the state's $137 billion pension fund. Almost 6 percent, or $2.4 billion, of its short-term investments consist of asset-backed commercial paper that has defaulted."

"Should the withdrawals continue, Florida's pool may have to consider filing for bankruptcy protection, says John Coffee, a securities law professor at Columbia Law School in New York. 'A bankruptcy could handle these kinds of problems if they feel they'll become insolvent,' he said."

"Coffee predicts the pool will likely file lawsuits to recover losses. 'I'd expect the pool is going to sue the people who sold them the commercial paper, saying the risks were hidden,' he said."

"Lehman Brothers Holdings Inc. sold Florida most of its now-default-rated asset-backed commercial paper. Lehman spokesman Randall Whitestone declined to comment."

Busy calling the lawyers, no doubt.

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