Make us your home page
Instagram

Today’s top headlines delivered to you daily.

(View our Privacy Policy)

Lehman bankruptcy to weigh on Florida

Elizabeth Rose, a specialist with Lehman Brothers MarketMakers, works her post on the trading floor of the New York Stock Exchange on Monday. Florida owns more half a billion dollars worth of stocks and bonds in Lehman Brothers.

Associated Press

Elizabeth Rose, a specialist with Lehman Brothers MarketMakers, works her post on the trading floor of the New York Stock Exchange on Monday. Florida owns more half a billion dollars worth of stocks and bonds in Lehman Brothers.

TALLAHASSEE — The state of Florida could lose more than tens of millions of dollars as Wall Street icon Lehman Brothers heads into bankruptcy.

And the financial trouble might not end there.

At the end of August, the State Board of Administration held more than $8-billion of investments in other troubled companies. The group includes investment firm Merrill Lynch, insurance company AIG, savings and loan Washington Mutual and government-backed mortgage lenders Freddie Mac and Fannie Mae, many of which continued to drop in value this past week.

SBA officials and financial experts say it's too early to tell how those investments will hold up in coming months or what impact Lehman Brothers' historic downfall will have on state finances.

"It's pure speculation at this point what the value of any securities would be,'' said Joel H. Levitin, a bankruptcy lawyer with New York-based Cahill Gordon & Reindel. "I don't know how anybody could have enough information to put a meaningful value on the equities or the bonds at this point."

Florida owns more half a billion dollars worth of stocks and bonds in Lehman Brothers, spread throughout Citizens Property Insurance Corp. and the Florida Treasury and funds managed by the State Board of Administration, or SBA.

Florida's Retirement System has the most Lehman Brothers stocks and bonds, which topped $300-million on Sept. 10. That's less than 1 percent of the pension plan's total of $125-billion, according to SBA records. Most of the Lehman Brothers investments are fixed income securities, including bonds, which typically get priority over stocks in bankruptcy proceedings.

Still Lehman's bankruptcy could be painful, with its stock holdings, at roughly $68-million, potentially "wiped out," Chief Financial Officer Alex Sink told the St. Petersburg Times on Friday. Already SBA was reporting losses on Monday of about $55-million in Lehman stocks and another $29-million in fixed income holdings.

Despite the problems, Florida's retirement pension fund — the nation's fourth-largest public retirement plan — continues to be one of the best-funded in the country with a $6-billion surplus, experts say.

"It's scary," said Richard Ferlauto, director of pension policy at the American Federation of State, County & Municipal Employees union in Washington.

"It's never good to be in a down-market. But (Florida's pension fund) can weather this storm better than most."

Lehman Brothers was one of several brokers that sold the SBA billions in shaky, mortgage-related securities that ran into trouble last year and were eventually downgraded by rating agencies.

The SBA had been considering a lawsuit against Lehman after Gov. Charlie Crist and Chief Financial Officer Sink, who serve on the SBA's three-member board of trustees, said they suspect the firm dumped tainted securities on the state. SBA had been in negotiations with Lehman over the bad debt.

The SBA board of trustees, including Sink, Crist and Attorney General Bill McCollum, are expected to discuss Lehman Brothers holdings at today's meeting, as they're scheduled to get briefed on the long-term health of the pension plan, which Sink had requested at the last Cabinet meeting.

Sink said she was concerned, because the pension plan's value dropped 4.4 percent in fiscal year 2007-08.

The Chicago firm Ennis Knupp & Associates analyzed the pension plan as of Sept. 10 and reported that even with the drop, the pension is "well preserved" for the long term: "A year in which performance falls well below the target is not an unexpected occurrence."

Pinellas and Hillsborough counties and the city of St. Petersburg were not invested in Lehman Brothers, they reported Monday.

But all state investment financial chiefs were watching the financial markets closely.

"I don't think anyone with any investments will be able to say there will be no impact," said Tish Elston, St. Petersburg deputy mayor. "You don't know when something like this happens what it means to the entire investment community."

Times staff writers Connie Humburg, Cristina Silva, Will Van Sant and Bill Varian contributed to this report.

Lehman bankruptcy to weigh on Florida 09/15/08 [Last modified: Monday, September 22, 2008 10:42am]
Photo reprints | Article reprints

© 2017 Tampa Bay Times

    

Join the discussion: Click to view comments, add yours

Loading...
  1. No. 21 USF Bulls roll over Temple to stay undefeated

    College

    TAMPA — They emerged from Raymond James Stadium's southwest tunnel on the 11-month anniversary of their public humiliation at Temple.

    Bulls tailback Darius Tice, who rushes for 117 yards, is elated by his 47-yard run for a touchdown in the second quarter for a 10-0 lead.
  2. Fennelly: USF thrashes Temple to stay unbeaten; too bad not many saw it in person

    College

    TAMPA

    No. 21 USF ran its record to 4-0 Thursday night with some payback against Temple, a 43-7 trouncing, no contest, as if anyone cares, at least judging by the paltry crowd at Raymond James Stadium. Where was everybody?

    Bulls cornerback Deatrick Nichols (3) celebrates with teammates after making a defensive play during the first half.
  3. Former Ray Tim Beckham's over being traded, or is he?

    The Heater

    BALTIMORE — As the Rays reunited Thursday with Tim Beckham for the first time since he was dealt July 31 to Baltimore, it became very clear that not everything in assessing the trade is as it appears.

    Tim Beckham, here in action Monday against the Red Sox, has hit .310, with 10 homers and 26 RBIs since going to the Orioles.
  4. Bucs probe how to fix deep-ball chances missed vs. Bears

    Bucs

    TAMPA — It was only minutes after the Bucs had demolished the Bears 29-7 Sunday when quarterback Jameis Winston tried one final time to connect with receiver DeSean Jackson.

    QB Jameis Winston says he’s focused on the deep-ball chances to DeSean Jackson he missed in the opener: “We left a lot out there.”
  5. Rays journal: Ugly first inning dooms Andriese, Rays against Orioles (w/video)

    The Heater

    BALTIMORE — Rays manager Kevin Cash said before Thursday's game that RHP Matt Andriese was among the pitchers who would most benefit from a strong finish to the season.

    Matt Andriese has a tough first: hits to four of first five batters, leading to three runs, the only ones he gives up in six innings