Wednesday, October 8, 2008

Kennedy: State Investments are Safe

In the aftermath of turmoil on Wall Street and in the nation's credit markets, Colorado treasurer Cary Kennedy is insisting that the state's money is not at risk.

Colorado has almost $7 billion in investment holdings.

“The most important thing for people to know is that our first priority is protecting the safety of taxpayer funds,” Kennedy said. “We take a highly conservative approach in our investments. Our exposure to the ups and downs of the market is limited.”

Kennedy said that the state had not realized any losses up to this point, and that she was continuing to monitor both the national and the local economic situation.

“The state does not invest in equities, therefore we’re more insulated when the markets rise and fall," Kennedy said. “What we’re going through now in our financial markets is unprecedented, but we are as strongly protected as possible.”

Specifically, Kennedy said that the Treasury did not have holdings of asset-backed commercial paper or structured investment vehicles.

“We do not hold collateralized debt obligations (“CDOs”), and we are not holding money market funds that are in trouble,” she said.

The state treasurer, a Democrat elected in 2006, also explained that Colorado had no equity stakes in companies such as Bear Stearns, Lehman Brothers, Goldman Sachs, Morgan Stanley or Merrill Lynch. About one half of one percent of the state’s investment holdings is in two subsidiaries of AIG.

In December 2007 Kennedy discontinued the state’s securities lending program due to concerns she had about the market’s direction.

“Our analysis last December showed it wasn’t worth the risk to continue the program, so we stopped it,” she said.

Kennedy also put the state’s investment holdings online as one of her first acts after taking office. “Transparency is the best way for people to have confidence in what we hold,” said Kennedy.