I am truly amazed at the ever increasing effects of the mortgage default debacle. This might be something interesting to investigate further as it relates to King County (see below). Rest assured that King County officials are monitoring the situation closely
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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.....
......Thousands of school, fire, water and other local districts across the U.S. keep their cash in state- and county-run pools. These public accounts, modeled after private money market funds, are supposed to invest in safe, liquid, short-term debt such as U.S. Treasuries and certificates of deposit from highly rated banks.
The Florida pool, which was the largest of its kind in the U.S. at $27 billion before the recent spate of withdrawals, has invested $2 billion in SIVs and other subprime-tainted debt, state records show. Connecticut, Maine, Montana and King County, Washington, are among other governments holding similar investments, in smaller quantities......
....When local governments withdraw funds from the pool, the state must sell off holdings to raise the cash. Because Florida's pool has been forced to quickly raise billions of dollars to meet withdrawal demands, it won't get top dollar for its asset sales, says Joseph Mason, professor of finance at Drexel University.
"When funds like this are liquidated, the Street will take advantage of their desperation. They don't care if you're a hedge fund or a school district,'' said Mason, who completed an 18-month appointment as a scholar in residence at the Federal Deposit Insurance Corporation in January.
Mason, who has studied the history of bank failures, understands the rush by Florida municipalities to pull their money from the pool.
"The first people in the withdrawal line get 100 percent of their money,'' he said. "The loss is suffered by the people behind them in line. Since nobody wants to be at the end, you get a run on the pool.''.....
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