Last mission to repair the Hubble telescope Hubble space telescope discoveries have enriched our understanding of the cosmos. In this special report, you will see facts about the Hubble space telescope, discoveries it has made and what the last mission's goals are.
For their own good
Fifty years ago, they were screwed-up kids sent to the Florida School for Boys to be straightened out. But now they are screwed-up men, scarred by the whippings they endured. Read the story and see a video and portrait gallery.
Fill out this form to email this article to a friend
State revises fund's rules
Municipal investors face restrictions on withdrawals. A new manager will take over.
By JENNIFER LIBERTO, Times Staff Writer
Published December 5, 2007
TALLAHASSEE - Scrambling to restore investor confidence, state officials on Tuesday agreed to reopen a troubled local investment pool on a restricted basis to prevent another catastrophic run.
Four days after freezing the fund as jittery investors siphoned $10-billion from the pool, the State Board of Administration imposed limits on how much money can be withdrawn without financial penalty.
At the end of the meeting, the fund's embattled manager, Coleman Stipanovich, resigned his $182,000 post, saying it would best "restore confidence in the fund."
The pool, which could reopen as early as Thursday, will no longer be managed and invested by the state. It will be run by publicly traded financial manager BlackRock Inc. until the state can formally bid out the job.
"I hope many local governments will re-enter the fund and realize it's going to be managed by an institution that manages $200-billion in cash assets and has an impeccable reputation," said Chief Financial Officer Alex Sink, who is on the board along with Gov. Charlie Crist and Attorney General Bill McCollum.
At first glance, however, these moves didn't seem to be enough to lure some former investors.
Pinellas County Clerk of the Court Ken Burke pulled Pinellas' entire $290-million investment on Nov. 20 and put the funds in a bank money market account. Burke says the salvage plan won't have him putting money back in the SBA any time soon.
"Oh, heck no," Burke said. "Until they give us assurances that every dollar put in that fund will be returned to the investors, I think there will be very little confidence in the fund."
The state fund's meltdown has gained national attention as the first example of a major publicly managed fund struck by fallout from mortgage and credit crises.
Lack of information about the troubled securities spurred a run with dozens of municipalities pulling out their investments, leaving only $14-billion of what had been $28-billion two months ago.
Tuesday the board offered no guarantees. The riskiest securities in the existing pool will be set aside in a separate fund - roughly 14 percent of the pool - that investors can't touch for the time being.
These securities are no longer worth what the fund paid for them, which means the fund isn't worth its stated value of $14-billion. Chris Stavrakos, a BlackRock investment adviser, refused to estimate the fund's "market" value.
Even though the fund doesn't hold subprime mortgages, the state pool owns securities backed by other types of mortgages. Prices of those securities have dropped as investors shied away from anything related to mortgages. About 6 percent of the fund, or $867-million, is in mortgage-based securities that have defaulted.
For now the money in the state pool will be split into two funds. Existing investors' assets will be divided, with 86 percent in Fund "A," which includes all the safe assets. Fourteen percent will be put in Fund "B," which holds the troubled assets.
Local governments that choose to reinvest in Fund A will not have to invest anything in Fund B. Also, new investors who buy into Fund A won't be subject to withdrawal fees.
Existing investors who want to withdraw money from Fund A will be assessed a 2 percent fee for pulling out more than $2-million or 15 percent of their holdings (whichever is greater).
As time goes on and more people reinvest, SBA hopes to lower the fees and raise the limits so investors can take more out of Fund A without penalty.
Hillsborough school superintendent MaryEllen Elia was pleased to see a plan emerge for the fund, but was not keen on paying a fee to withdraw from the $573-million the schools have on deposit.
"This whole issue of having to possibly pay a redemption fee is very problematic," said Elia, who foresees no problems making payroll; the district doesn't need to tap the fund until late February. "That implies that to get the money that is Florida taxpayer money, we have to pay a fee."
Hillsborough County Clerk of the Circuit Court Pat Frank said governments that kept money in the pool are being punished for not withdrawing and losing the benefit of earning interest on the entire investment.
"That doesn't exactly seem like you're rewarding people for good deeds," Frank said. "We shouldn't be punished because we didn't withdraw."
The Pasco County Commission discussed its $486-million investment and plans to meet again on Thursday to discuss options. The commission is considering whether to pull out the maximum 15 percent. And it may ask for an investigation into whether the state followed its own investment policy.
"If the state didn't follow the investment policy statement, the state certainly has liability," said Pasco County Commissioner Michael Cox, a certified financial planner with Morgan Stanley.
The single largest investor in the pool is the state-run insurer, Citizens Property Insurance Corp., which has roughly $2-billion in the pool, including $266-million in the untouchable fund.
While Citizens probably won't need access to the money immediately, the insurer was counting on that money to grow since it insures one out of every three Florida homeowners.
"I'd love to have those dollars today in a place I'm more comfortable with," said Citizens chief financial officer Sharon Binnun, who acknowledged there could be a loss in the fund that contains $266-million. "We don't have a sense yet if we can recover the entire amount."
Times staff writers Helen Huntley, Will Van Sant, Letitia Stein, David DeCamp, Bill Varian and Tom Zucco contributed to this report.