A congressional commission investigating the nation's financial crisis has demanded "responses and documents" from Florida about an investment debacle three years ago that could cost local governments hundreds of millions of dollars.
The Financial Crisis Inquiry Commission wants to interview managers from the State Board of Administration about risky securities they bought before the financial meltdown.
The bipartisan panel, appointed by Congress last year, is seeking detailed information not only about those investments but answers to questions including: Why did the SBA invest in exotic, mortgage-backed securities for the local government pool? Was it to boost the fund's return on investment?
In nine months of hearings, document gathering and interviews, a 10-member commission has been examining the causes of the country's financial crisis and how to avoid another one.
The commission's focus has been Wall Street and agencies that regulate it, but in recent days, the panel has zeroed in on the financial meltdown's impact on Main Street, notably in hard-hit California, Nevada and Florida.
On Tuesday, commissioners were in Miami, where they heard five hours of testimony about regulatory lapses and financial incentives that fueled mortgage fraud.
The panel's letter to SBA executive director Ashbel C. Williams Jr. came a day after the St. Petersburg Times reported on e-mails and internal memos that show state money managers tried to get around rules restricting the investment of local government funds in risky securities.
Those documents are at odds with statements state leaders and the SBA made almost three years ago that contended that Wall Street investment firms misled the agency into buying the risky securities.
Commission spokesman Tucker Warren said the panel's staff became aware of the Times' story after it sent the letter.
Hundreds of cities, counties and school districts use the local pool as a place to park their money until they need it to pay bills. In 2007, many of them withdrew billions after Bloomberg News reported that some of the investments were downgraded to junk status. The run shrank the local government pool from $31 billion to less than $6 billion.
The SBA is overseen by a three-member board of trustees: Gov. Charlie Crist, Chief Financial Officer Alex Sink and Attorney General Bill McCollum.
In the letter demanding documents from Florida, the commission's general counsel, Gary J. Cohen, asked that the SBA produce the information by Oct. 1.
Cohen described the panel's letter as a "demand for responses and documents. … We may have additional requests upon our review of the information."
A spokeswoman for McCollum did not respond to a request for comment.
Sink's spokeswoman said the office had no comment.
Gov. Crist was asked about the SBA at an unrelated public event in Tallahassee on Wednesday. Considering the efforts that money managers went to to make questionable investments and a consultant's report faulting the SBA for lax oversight, could Crist have done a better job?
"We can always all do better, whether you're a journalist or whatever your endeavor in life might be," Crist said. "And I think that one thing that's important to recognize is that we have been struggling through the toughest economic meltdown since the Great Depression. And I think that the work that's been accomplished there and the protection of the assets has been pretty good."
The SBA posted a one-paragraph note on its local government website about the congressional inquiry, saying that the agency intended to cooperate fully.
The congressional commission is chaired by Phil Angelides, the former California treasurer. Its vice chairman is former Rep. Bill Thomas, who represented California for 28 years in Congress. It is scheduled to deliver its report to Congress and the president on Dec. 15.
Times/Herald staff writer Marc Caputo contributed to this report.