Florida local governments and school districts pulled $8 billion out of a
state-run investment pool, or 30 percent of its assets, after learning that the
money-market fund contained more than $700 million of defaulted debt.
The State Board of Administration manages about $42 billion of short-term
investments, including the pool, as well as the state's $137 billion pension
fund. Almost 6 percent, or $2.4 billion, of its short-term investments consist
of asset-backed commercial paper that has defaulted. Those holdings include $425
million in Axon Financial, a structured investment vehicle, or SIV, according to
state records.
Should the withdrawals continue, Florida's pool may have to consider filing
for bankruptcy protection, says John Coffee, a securities law professor at
Columbia Law School in New York. ``A bankruptcy could handle these kinds of
problems if they feel they'll become insolvent,'' he said.
Coffee predicts the pool will likely file lawsuits to recover losses. ``I'd
expect the pool is going to sue the people who sold them the commercial paper,
saying the risks were hidden,'' he said.
Again- Where do your money market funds invest?
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