Democrats thought they dodged a bullet when billionaire and real-estate speculator Jeff Green flamed out in the Florida Senate primary, as they worried about being able to run on their anti-speculator class warfare rhetoric in the general election. As it turns out, Green presented less of a problem than Alex Sink, the Democratic nominee for Governor and the current chief financial officer of the state. At least Green correctly guessed on the direction of the market — and didn’t try to shirk responsibility for it later, as a new report from the St. Petersburg Times shows that Sink did:
Three years ago, the state of Florida made bad investments that lost hundreds of millions in value. State leaders blamed the sharks of Wall Street, who they said duped Florida money managers into buying way-too-risky securities. …
Now the St. Petersburg Times has obtained e-mails and internal memos that document a story at odds with the one told by Crist, Sink and McCollum, the elected officials responsible for oversight of the state’s money managers.
The securities Wall Street “dumped” on Florida? The records show the state was anything but an innocent dupe; it was an eager partner.
Going back at least seven years, state money managers had been trying to find a way around rules that restricted them from buying certain risky securities. Time and again they asked, time and again lawyers told them no.
But so eager were Florida’s money managers for higher yields, they bought them anyway. In two months at the brink of the housing market meltdown in 2007, the state invested at least $9.5 billion in securities it was not authorized to buy, a review of confidential memos shows.
This proves the wisdom of the anti-establishment impulse among Florida Republicans this year. Both Charlie Crist and Bill McCollum were the anointed candidates for the Senate and Governor, respectively. Crist has already been exposed as using party funds for his family vacation at Disneyworld, and now Crist appears to have misled Floridians on the nature of the state’s activities in the market. McCollum would have had a difficult time explaining himself in this instance as well after having encouraged a criminal investigation, although he at least didn’t appear to politicize it to the extent that Crist did, who publicly accused four Wall Street firms of intentionally defrauding the state.
The main culpability belongs to Sink, however. She had the fiduciary duty to perform due diligence on the agencies handling these investments, as well as enforce the law in handling Florida’s treasury. Instead, Sink and her team appear to have tried to find ways around the law, and in the end broke them to jump on a bandwagon as the wheels came off. Later, when the collapse came, Sink looked for ways to blame others for her lack of oversight and discipline, as did Crist and McCollum, who were also trustees to the fund.
Sink has served as Florida’s CFO since January 2007. The illegal purchases that lost hundreds of millions of dollars in bad investments happened entirely on her watch. If Sink couldn’t handle her primary duty as CFO nor own up to her failings in that position, Florida should hardly trust her with broader responsibilities. They should be chasing her out of the position she holds now.