News

Eshoo testifies on impact of Lehman collapse

 

By Bay City News Service

U.S. representatives Anna Eshoo, D-Menlo Park, and Jackie Speier, D-San Mateo, testified before the House Financial Services Committee Tuesday, April 20, about the impacts on local government agencies of the collapse of the Lehman Bros. investment firm nearly two years ago.

San Mateo County lost about $155 million in county taxpayers' money when Lehman Bros. collapsed in September 2008, out of a total of about $1.7 billion lost by local and state governments nationwide when the firm went under, Rep. Eshoo testified.

Among local agencies impacted were the Menlo Park City School District, which lost about $3.5 million; and the Sequoia Union High School District, which lost about $6.5 million.

Roughly 5.9 percent of a countywide investment pool was invested in Lehman Bros. securities.

"Up until the days before its declaration of bankruptcy, Lehman Brothers was considered one of the most trusted, reliable and safest firms to invest in," she said.

The hearing included a report from Anton Valukas, a court-appointed examiner who scrutinized the details of the financial giant's collapse.

"The examiner's report clarifies just how risky the practices and lack of transparency that sank Lehman really were," Rep. Eshoo said.

As part of her testimony, Rep. Eshoo said she and Rep. Speier will introduce legislation to aid counties still suffering from the Lehman Bros. disintegration after trying unsuccessfully last year to get money from the Troubled Asset Relief Program to help reimburse local governments.

Also testifying at the Tuesday hearings were Treasury Secretary Timothy Geithner, Federal Reserve Board Chairman Ben Bernanke, U.S. Securities and Exchange Commission Chairman Mary Schapiro, former chairman and CEO of Lehman Bros. Richard Fuld, and others.

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Comments

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Posted by Joseph E. Davis
a resident of Woodside: Emerald Hills
on Apr 20, 2010 at 8:25 pm

Eshoo and Speier are dangerous clowns and deserve the boot. Why should anyone else have to pay for the failure of our local governments to properly invest their ill-gotten gains?


Like this comment
Posted by Willy
a resident of Woodside: other
on Apr 21, 2010 at 12:49 pm

Mr Davis:

Those "dangerous clowns", as you refer to these two widely popular, elected representatives, are doing what they can to recover funds lost in the unregulated Wall Street fiasco of the last decade. To the benefit of local school districts.

Our local officials invested in funds that were generally highly rated, although unbeknown to most, sitting atop a house of cards due to little or no transparency or regulatory oversight. They were not alone.

Are you suggesting Wall Street should be a wild west, no oversight, buyer beware environment (again?)

And that serves the good folk of our country how, exactly?


Like this comment
Posted by Peter Caryotakis
a resident of Portola Valley: Ladera
on Apr 21, 2010 at 12:54 pm

Joseph,
In what way did the school districts do anything wrong in having the county hold their money? They have to do that by law. Most of that money had just ended up with the county for the following year's budget. Ill gotten gains? Please! That was our school's budgets!

The national government has bent over backwards to help corporations that also did poorly and in many cases lost money due to their own mistakes. This is a case of PUBLIC money that was lost. Why would it be wrong to replace those losses with public money since it was the federal government that decided that losing Lehman Brothers was acceptable? There should be many many people in jail for the losses that were created by all the poor decisions and outright lies that have been told. Instead, the fools who created this problem in many cases got bonuses. They created more grief than the engineers at Chernoble to the world economy, but don't try to hold them accountable. They have contracts! What they wrote down as legal documents for anyone else? Worthless.

But hey, if you want to continue to push the Californian education system into the trash can, go ahead.

I'm amazed that all the taxpayers in this area didn't push for this simple solution ages ago. This chunk of money should have been the first to be paid out in the relief effort. Instead, our schools are trying to get more taxes from us... which of course is NOT a great economic stimulus for any of us!

Our local recreation district also lost money, but we've at least learned that we don't have to have the county hold our "ill gotten gains"


Like this comment
Posted by Peter Carpenter
a resident of Atherton: Lindenwood
on Apr 21, 2010 at 12:56 pm

Peter Carpenter is a registered user.

Willy states:"Our local officials invested in funds that were generally highly rated, although unbeknown to most, sitting atop a house of cards due to little or no transparency or regulatory oversight"

Not all our local officials went down this road. The Fire District, thanks to a superb civil servant Michelle Braucht, pulled the Fire District's funds out of the San Mateo County investment pool because she believed that it was investing in a house of cards. Why didn't other agencies do the same? Why should we reward poor financial management? Shouldn't we expect our local officials to be smart enough to recognize a bad investment?


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Posted by Willy
a resident of Woodside: other
on Apr 21, 2010 at 2:54 pm

Peter:

"Why should we reward poor financial management?"

Oh, worthy adversary: you say tomAto, I say tomAHto...

Why should we penalize the school districts, or more to the point, the kids?

;-)


Like this comment
Posted by time for change
a resident of another community
on Apr 21, 2010 at 4:46 pm

Everyone is sick and tired of Congress. Spier and Eshoo are part of the problem. It's the old story, everybody hates congress but loves their congressperson. We need to throw them all out and get some common sense in Congress. We know that Congress pushed the banks to make bad loans and that Fannie and Freddy aided and abetted the disaster...and are still doing so.

Did Jackie and Anna do anything to stop the financial crisis? Or are they just lapdogs for Nancy Pelosi.


Like this comment
Posted by Nana Kay
a resident of Atherton: other
on Apr 21, 2010 at 5:00 pm

If going after bailout for one set of investors, namely local governments, why not go after bailouts for individual investors like ourselves? Doesn't fairness demand this? In any case any arguments used for bailing out local government groups will surely be adopted by the rest of the investors to demand the same consideration.


Like this comment
Posted by Willy
a resident of Woodside: other
on Apr 22, 2010 at 10:00 am

time for change:

"We need to throw them all out ..." sorry, you only get to vote against one of them.

It's the law. ;-)


Like this comment
Posted by Peter Caryotakis
a resident of Portola Valley: Ladera
on Apr 22, 2010 at 11:44 am

Nana,
Seems to me the Federal Government already decided to "bail out" anyone who invested in AIG and the other giants. Perhaps if an individual investor was forced by law to have someone else hold on to their operating cash, then I'd feel inclined to help that person out. This was PUBLIC money, it should have been first on the list of money that should have been "bailed out." Perhaps all Lehman Brother's investors should ask why Lehman was allowed to "fail" which thus saved the rest of the giants from their credit default swap debts. Why anyone was ever asked to make those swaps "good" when they were (and still are) insane is a better question. "Sure! We'll guarantee your billions, if you pay us a few million." (Never mind they never had the capital to support their claims. It's like printing money for them until someone points out that it's all rubbish) So YES... since the Feds allow this garbage, it becomes ALL of our responsibility. They can change all of that now. Regulation. Incarceration!


Like this comment
Posted by Peter Caryotakis
a resident of Portola Valley: Ladera
on Apr 22, 2010 at 12:03 pm

Peter Carpenter,
God loves your Fire District! Perhaps they should take on running more than just their current responsibilities. Perhaps they should run seminars on how to properly make all decisions.

The SCHOOLS do not have the option of holding on to their own cash when it comes from the state. I would not trust them to manage their bond money. Entities within the county didn't have to be invested in anything with the county. They divided the Lehman loses by percentages to all of those that had money with them. As far as I know the county doesn't show us their audits. Gee, maybe the ALMANAC should tell this WHOLE story so we have ALL the facts.

We know that you love putting "local official" down, but in this case the law determined where the money had to be. It's amazing that Michelle Braucht knew that Lehman was not going to be able honor what were rated as safe investments. It's a wonder she even knew that the county had invested anything that way. I'm very sure that money that was intended to be used within the next few months was NOT invested that way, so no reporting of the the county's investments would have helped warned school districts or other local officials of the peril of losing taxpayers' money.... AND bond money.

Has anything changed at the county to ensure that their investments are all totally secured?? Hey ALMANAC... how about some investigative reporting?


Sorry, but further commenting on this topic has been closed.

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