Sunday, June 5, 2011
San Mateo County still feeling pinch from Lehman Brothers collapse
In retrospect, losing $155 million of public funds in a single day was like a bad hit to the immune system. Alone, it wasn’t enough to kill the patient, but it sure didn’t help when the patient caught a bad flu right afterward.
Nearly three years after San Mateo County took the biggest hit from the collapse of Lehman Brothers of any municipality in the nation, financial leaders on the Peninsula say the loss is still being felt, especially in the county’s school districts.
Such is the legacy of the San Mateo County Investment Pool’s massive loss in the Lehman Brothers bankruptcy. The failure of the massive financial services firm in September 2008 wiped away 7 percent of the pool’s fund overnight — money that school districts, public transit agencies and county departments had placed in the care of the county treasurer.
Some of the lost money had been targeted toward specific programs or building projects, but much of it was simply reserve money set aside for a rainy day — which unfortunately went missing just at the start of a long, long downpour.
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2 comments:
Do see the HBO movie "Too big to fail". The decision-making leading up to the failure of Lehman and the bail-out of other major financial institutions is aptly described and dramatized.
7% loss in the San Mateo County portfolio reversed profits from the long-term "rainy day fund" gain how many years, 3-6 years? Bad, but not the end-of-the-world. How did your investment portfolio perform? How long will it take for the USA and other worldwide economies and people to recover from the systemic losses of this financial crisis (where 1/3 of the world's wealth was wiped-out).
Lehman got unlucky, but they always were a little too aggressive from my view. And, all investments carry risk, including bonds (the major investment of those portfolios). When we looked at the net effect to the total $155 million San Mateo County portfolio last year, my recall is it was down 5.5%.
The apex of the USA and worldwide financial crisis began in late September,2008. There was convenient regulation failure and "blind oversight eyes" at least during the prior 8 years leading up to this.
Goldman Sac's had all the right connections in Washington DC and the White House..Thus Lehman was left to rot.
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