Florida State Blocks Access To Billions In An Investment Pool; Small Governments Start Panicking

November 30, 2007 7:33 a.m. EST

Tallahassee, Fl. (AHN) - Top Florida officials decided to freeze a state investment pool of $14 billion on Thursday, after the financial panic-driven school boards and local governments started withdrawing billions of dollars from the fund.

However, now some school districts and investors are worried and stuck as they cannot access their money.

According to the state officials, the investors had withdrawn almost $15 billion in the last one month to cover up the losses on investments in debt related to subprime mortgages crisis.

"If we don't do something quickly, we're not going to have an investment pool," said Coleman Stipanovich, executive director of the State Board of Administration.

The sudden shutdown has restricted some of the small governments and communities.

"We've got every dime of our cash in that pool," Hal Wilson, chief financial officer for Jefferson County schools, told Tallahassee Democrat. "What were they thinking?" He is now short $850,000 for Friday's payroll.

Before the funds were frozen, the state fund-managers allowed a withdrawal of $3 billion in total for the investors.

Some of the investors suggested using $137 billion state pension fund for public employees in Florida, which is also managed by the State Board of Administration.

But the union representing around 120,000 public workers didn't agree to use the pension funds.

"When something's that big, if problems happen it can take a long time to restore the health," Doug Martin, legislative director for the American Federation of State, County and Municipal Employees in Tallahassee, told the New York Times.

Florida's problems related to the subprime mortgage crisis are not new as the mortgage crisis has affected some of the world's biggest lenders and banks, driving the country's economy towards recession.