Thursday, May 7, 2009

Bay Area Counties Join Others for TARP Money

over their loss on Lehman and Washington Mutual investments. A Congressional hearing was held Tuesday this week.

According to San Jose Mercury News:

"The Lehman collapse jolted the world economy and claimed collateral damage in at least 21 states, where counties and cities saw $1.7 billion in investments they thought were safe become almost worthless. That in turn cost about 20,000 jobs nationwide, including 1,658 in the Bay Area [that's California], said economist Christopher Thornberg."

San Mateo County lost $155 million, Alameda $5 million, Santa Clara $1 million, Monterey $30 million including Washington Mutual investment ($20 million), and the city of Fremont lost $4 million.

These counties and cities want their investment principals back, at 100% on a dollar. The Congressmen/women for these counties argue that total $1.7 billion bad investments that counties and cities nationwide hold is just a small change, compared to the size of the bailout fund spent by Treasury Department. The legislation has already been introduced legislation asking Geithner for TARP money to reimburse local governments that lost money to Lehman Brothers.

According to Monterey County Herald,

"A provision in the Toxic Assets Relief Program allows Treasury Secretary Timothy Geithner the latitude to use bank bailout funds to compensate local governments for the Lehman failure, a move urged by congressional representatives. Instead, the Treasury Department has focused on using the TARP money to prop up struggling banks.

"But County Treasurer Lou Solton said the federal government's decision to pass over Lehman while bailing out other institutions, including Fannie Mae, Freddie Mac and AIG, makes this a special case.

""The real issue is fairness," Solton said. "The bottom line is these are taxpayer dollars being returned to taxpayers. We're bailing out Wall Street, what about Main Street?""

This has made me wonder...

  • "The bottom line is these are taxpayer dollars being returned to taxpayers." Sure.
  • What about private, individual Main Street investors in LEH and WM debts? Don't they also deserve 100% on their principal?
  • Who's next? University endowments? Calpers?
  • Have they ever heard of Credit Default Swaps?


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