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Treasurer: State has $254 million more at risk

SAM MORRIS / LAS VEGAS SUN file

Assembly Minority Leader Heidi Gansert, R-Reno, said the state should consider taking a $1.7 million hit to avoid losing much more.

By David McGrath Schwartz (contact)

Tuesday, Feb. 24, 2009 | 2 a.m.

Face to Face: Taking its Lumps?

See the memo Treasurer Kate Marshall sent to legislative leaders

$50 million could go the way of the Lehman Bros. (2-21-2009)
Legislature begins session amid bleak financial outlook (2-2-2009)
What we can expect – and whom to blame: In Las Vegas (9-28-2008)

A shaky Wall Street is rattling Nevada’s capital.

After notifying legislative leaders last week that the state faces a $50 million loss in the Lehman Bros. bankruptcy, Treasurer Kate Marshall testified before an Assembly committee Monday that Nevada has another $254 million in similar investments.

The state could pull out of all of its securities loans, but would incur a $1.7 million loss, Marshall said. (Securities lending allows the state, which is prohibited from directly purchasing stock, to purchase such items as U.S. treasury bonds and invest them with a Wall Street bank.)

“A fire sale is, by definition, something in which you incur losses,” she said.

Assembly Minority Leader Heidi Gansert, R-Reno, said after the hearing that the state should evaluate ending those investments. “Considering the amount of money at risk, it would only be prudent,” she said.

Gansert is among the Republican lawmakers to have criticized Marshall for failing to pull a $50 million investment with Lehman, despite signs the investment bank was about to fail.

Wachovia Bank had invested about $50 million in state-owned securities with Lehman and assured Marshall that the state would get all of its money back.

The loan is set to mature March 23, but with Lehman now in bankruptcy the state could lose the entire $50 million.

Marshall told the committee she was “watching” a $75 million investment, set to mature in August, with Wells Fargo.

Are you worried about it? Assemblyman Joe Hardy, D-Las Vegas, asked.

Marshall repeated she was “watching” it.

The treasurer defended her office’s actions. Many state and local governments have incurred large losses during the economic crisis, she said.

The treasurer’s office has taken a number of steps to guard against unnecessary risks.

In 2007 the office stopped its securities lending program against the advice of Wachovia.

Marshall also elected not to invest state money in Fannie Mae or Freddie Mac. “That turned out to be quite a prescient decision,” she said.

Much of the $50 million invested with Lehman could be recouped through the bankruptcy process, Marshall said. But she acknowledged that if the state does eventually get the money back it’s unlikely to happen soon enough to fill holes in the current budget.

The Legislature would have to plug the hole left by the bad investment, she said.

Discussion: 5 comments so far…

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By odog

Feb. 24, 2009

4:05 a.m.

Suggest removal

The state should be using a conservative approach when investing our tax dollars. If they lose our money in risky investments, the losses should have to come out of their paychecks and retirement funds.
By renomuse

Feb. 24, 2009

6:13 a.m.

Suggest removal

So the long reach of greedy home flippers, greedy real estate agents, greedy loan brokers, greedy banks, greedy appraisers, greedy Wall Street investors, LIARS in general, have come home to roost. Now we all pay because this is our country and we have to be patriotic or we will be weakened beyond belief. Thank you Mr. Bush and your cronies.

I refuse to have nationwide collective amnesia. I know when this started and who was in charge and who told us to buy, buy, buy.
By renomuse

Feb. 24, 2009

6:22 a.m.

Suggest removal

BTW, why should the Treasurer be punished for doing what every American knew to do? She invested our dollars into the trusted hands of Bush cronies on Wall Street from Goldman Sachs to Wells Fargo. And doesn't the idiot King Jim have a member of Wells Fargo's protected elites working in his office? How about her salary?
By jfnance32

Feb. 24, 2009

7:25 a.m.

Suggest removal

That previous treasurer endured the dot bubble bursting and the 9/11 hit on the stocks and came out way ahead.

Instead of spending so much time on silly stuff she should have been working on understanding the markets.

She should offer her resignation and get out the way.
By KillerB

Feb. 24, 2009

10:33 a.m.

Suggest removal

"Wachovia Bank had invested about $50 million in state-owned securities with Lehman and assured Marshall that the state would get all of its money back."

Funny there's no mention here of Nevada's AG. She seems eager enough to prosecute ordinary citizens for just about any reason. Why is she not suing Wachovia for this fraud?