Skip navigation.
Home
   Candidate & issue information

State Loses Access to $1B of Its Funds

Georgina Kawamura, director, Dept. of Budget & Finance, State of Hawaii

The state's money is not accessible at what it paid for its auction-rate securities (ARS) since investment banks stopped supporting them in February 2008. The ARS would sell now at a 21 percent discount, says the director of the state Dept. of Budget & Finance. But Bloomberg says that other investors have sold them at as much as a 40 percent loss.
---
by Greg Wiles

Honolulu Advertiser Staff Writer

More than a third of the state government's investment portfolio is stuck in illiquid auction-rate securities because markets for the investments remain frozen.

The state Department of Budget and Finance said $975 million of the state's $2.6 billion portfolio, or about 37 percent, is tied up in the investments. But it said having the money trapped in auction-rate securities isn't a problem now.

No. 1 Capitol District Building, location of the main Department of Budget and Finance offices

"The best thing for us to do now is hold it until it matures," said state Finance Director Georgina Kawamura, explaining the state would probably take a $200 million loss if it sold the investments now.

"I can't in good conscience sell it off and take an actual loss."

She added that if the state did sell, it could not reinvest the money at the same rate it is earning now with the auction-rate securities.

Full article [The Honolulu Advertiser]
---
Links:

$1B in Hawaii State Investments Frozen [HPI] Aug 30, 2009

Setting the Record Straight: The State has not incurred any actual or real losses by investing in auction rate securities [Hawaii Reporter] by Georgina Kawamura, Director of Budget and Finance for the state of Hawaii, Sep 3, 2009

Lapses noted in fiscal reporting [The Honolulu Advertiser]

Auction rate security [Wikipedia]

Wall Street Betrayal Seen in $4.8 Billion Company Debt Losses [Bloomberg] August 28, 2009

AuctionRatePreferreds.org

The Collapse of Auction-Rate Securities [boston.com]

SEC Charges TD Ameritrade for Auction Rate Securities Sales Practices
Settlement Enables ARS Customers to Receive All of Their Money Back [U.S. Securities and Exchange Commission] July 20, 2009