Almanac

Viewpoint - May 5, 2010

Editorial: Cheers for Reps. Eshoo, Speier

During the heated and very public bailout of major U.S. banks and manufacturers, the relatively tiny $1.7 billion lost by more than 40 local government agencies across the country, due to the fall of Lehman Brothers, has yet to be resolved — despite the efforts of our local representatives.

So after waiting and hoping but seeing no action from several House and Senate committees, Rep. Anna Eshoo, D-Menlo Park, introduced a bill, co-sponsored by Rep. Jackie Speier, D-San Mateo, that would help these agencies — including San Mateo County — recoup at least part of their losses.

California requires small government units to keep their long-term funds like bond monies in an investment pool, which in San Mateo County was operated by Treasurer Lee Buffington, who placed the money in Lehman and various other securities. When Lehman went under, the county and local agencies here lost $155 million, including $6.5 million from the Sequoia Union High School District and $3.5 million for the Menlo Park City School District. The San Mateo Community College District lost more than $20 million, while other local school districts, including Las Lomitas, Portola Valley and Woodside lost much smaller amounts.

And so far, despite lawsuits and requests for relief before various Congressional committees, no relief is in sight.

That is why Rep. Eshoo's bill is so important now, as Congress questions Goldman Sachs executives and others about their role in the biggest financial collapse since the Great Depression. Rep. Eshoo's bill would return money that belongs to local taxpayers and was lost due to no fault of any of the agencies involved, which in our view, had every right to expect the money was in safe hands.

In a statement, Rep. Eshoo said the Treasury Department has earned $15.4 billion from dividends, interest and the sale of bank stock that it purchased through the TARP (Troubled Assets Relief Program). It is expected that the government will accrue another $7.5 billion from the sale of its 27 percent stake in Citigroup.

The Eshoo bill, named the Restitution for Local Government Act, will require the Treasury to use profits from TARP assets to purchase Lehman Brothers securities held by local governments on Sept. 12, 2008, the Friday before Lehman collapsed

A major piece of Rep. Eshoo's argument goes like this:

"By selling TARP assets, the federal government has already made more than 10 times the amount of money that public institutions lost when Lehman collapsed." She added, "My legislation will require the Secretary of the Treasury to provide relief to those institutions with any future profit" the government takes in.

At this stage, it is difficult to handicap the chances of such a bill clearing Congress. Given the still-lagging economy, support may be hard to find for what could be viewed as a bailout. Certainly representatives Eshoo and Speier, with the help of House Speaker Nancy Pelosi, D-San Francisco, should be able to steer it to the proper committees for a fair hearing and perhaps pass it through to passage.

But along the way, it will be important for Congress to hear from constituents in the jurisdictions that lost millions of dollars with Lehman. For anyone who is concerned about these terrible financial losses to local schools, now is the time to step up and let your feelings be known.

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