For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.
FL CFO Orders State Funds to Look into Mortgage-related Risk
According to a news release, Sink is calling for
agencies to assess the amount of risk in the state’s
investment portfolios specifically related to
mortgage-backed securities as well as other investments
which may be affected by the collapse of the subprime
mortgage market.
While investment managers who manage state funds are
required to invest in funds with specific credit ratings
and other risk criteria, in some cases, high-risk
mortgage-backed securities have been repackaged, given a
high investment grade rating, and sold to investors, the
news release said. As ratings firms are
downgrading the ratings of several mortgage-backed
securities previously rated as high as AAA, Sink is
seeking to gauge the quality of the state’s investments.
“As the manager of the state Treasury with $20 billion in
tax dollars, I want to ensure we are safeguarding the
taxpayers’ money,” said Sink, who oversees the Department
of Financial Services, in the news release. “I have
ordered a thorough review of the state Treasury’s
investments to uncover and identify any previously
unknown risk to help us protect Floridians’ tax
dollars.”
The CFO also called on the State Board of Administration to review the investments of Florida’s $140 billion pension fund, and prepare to present the findings to the Florida Cabinet’s meeting on November 14, 2007. She is o encouraging other state entities – including the Florida Hurricane Catastrophe Fund, Florida Citizens Property Insurance Corporation, and the Florida Prepaid College Fund – to review their asset allocations, investment decisions, and risk levels.
According to a news report in the Tallahassee Democrat, State Board of Administration spokesman Mike McCauley said it is too early to say how much of the state’s investments are directly tied to mortgage-backed securities, but early indications are reassuring.