Nov 28, 2007 - Florida Local Government Investment Pool Freezes After Run.

Florida State Board of Administration halted withdrawals from the fund after investors began a run on the fund. The Florida LGIP is an investment pool for local government entities’ excess cash. It was exempt from registering as a money market fund and therefore was not subject to diversification requirements, maturity constraints, or risk limitations. 

The funds had $27B in assets from municipalities and school districts before it revealed that it owned $900 million in defaulted debt, a number it later increased to $1.5B.

The fund owned $650 million in CDs from Countrywide Financial Corporation, itself downgraded in Aug 2007 and rated just a notch above junk status.

Municipalities and school districts who used this fund much like their bank account to fund payroll and working capital were in a panic and requested $12B in withdrawals, creating a cash crisis within the fund.

For many communities, it was their only cash.

The pool re-opened on December 6, 2007, as two funds: Fund A containing non-toxic assets (86% of the remaining assets) and Fund B with the toxic assets (14%). Both funds were placed with a new manager. 

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