WASHINGTON — State and local governments from Florida to California to Colorado believed their public money was safe in top-rated accounts at Lehman Brothers. What could be safer than putting cash in a venerable investment bank that helped finance America’s railroads?
When the 158-year-old Lehman went belly-up last September and the government decided against a bailout, public officials in at least 20 states watched no less than $1.7 billion set aside for hospitals, fire houses, roads and schools evaporate from their books.
Lehman’s bankruptcy, the biggest in U.S. history, cut deeply into the budgets of state and local governments and other publicly funded entities, which by law keep operating money in conservative, interest- bearing instruments until it’s needed.
Boulder County and 61 other local governments in Colorado were forced to write off $5 million plus interest because the Colorado Diversified Trust had invested part of its assets in highly rated commercial paper issued by Lehman.
Florida lost more than $465 million. Public agencies in California’s San Mateo County — one of 35 public entities hit in that state — lost $155 million.
On Tuesday, public officials came to Capitol Hill pleading for a bailout. They asked the House Financial Services Committee to back legislation directing the Treasury Department to take some of the money left in the government’s $700 billion financial bailout and buy back certain Lehman investments at full face value.
“Ours was not a speculative investment,” said Bob Hullinghorst, treasurer of Boulder County. “We should not have been taking risks with taxpayers’ dollars. We did not think we were.”
