THE BURNED OVER DISTRICT

If you are not familiar with the problems of the Florida state investment pool for local governments, The NY Times has a nice synopsis of the effect that the CDO meltdown has had on this fund. The article also points out that this is not the first investment disaster for the pool.

This is not the first time the State Board of Administration has had to explain unusual investment losses. After the collapse of Enron in 2002, it came to light that the state pension fund had acquired big blocks of Enron stock just as other investors were dumping it. The fund lost $280 million.

Coleman Stipanovich, then the board’s deputy executive director, blamed an outside investment adviser, Alliance Capital Management. “We didn’t understand why they were buying it,” he told a Congressional hearing. “Even my mother was watching on TV and knew about Enron.”

Now angry depositors are asking much the same questions about Mr. Stipanovich, who was promoted to executive director in 2002 by then-Gov. Jeb Bush, and who worked closely with Lehman Brothers, the firm that sold Florida more of the subprime-tainted securities than any other firm.

Some of the purchases were in July and August, after the risks of subprime-mortgage related securities were widely known and most investors were shunning them. The timing of Florida’s purchases was first reported by Bloomberg News Service.

Some local officials said in interviews that they were also eager to learn what role Mr. Bush might have played. A month after finishing his second term as governor last January, he formed a consulting firm, which in June was engaged by Lehman Brothers. Mr. Bush also sits on the board of Lehman Brothers’s private equity unit.

Spokesmen for Mr. Bush and Lehman Brothers said Mr. Bush’s consulting work had nothing to do with the sales of the securities to the Florida investment pool.

Nope, nothing to see here, just because there is another gross failure of fiduciary responsibility by another Bush who then managed to land a sweet deal with one of the primary investment banks selling the crap to Florida. Just because it smells like shit, doesn't mean there is a pile upwind.