Oh dear. Bloomberg:
Salvatore Calvanese, the treasurer of Springfield, Massachusetts, for four years, had a ready defense for why he risked $14 million of taxpayer money on collateralized-debt obligations laden with subprime mortgages in 2007.He didn’t know what he was buying, he says, and trusted the financial professionals who sold them and told him they were safe.
“I thought they were money markets that were just paying more,” Calvanese said in an interview. “Nobody ever used the term ‘CDO,’ and I am not sure I would have known what that was anyway.”
Such financial mistakes, often enabled by public officials’ lack of disclosure and accountability for almost 90 percent of government financings in the $2.8 trillion municipal bond market, are costing U.S. taxpayers as much as $6 billion a year, according to data compiled by Bloomberg in more than a dozen states.
I think we have to hand it to Mr. Calvanese for being forthright, which is refreshing. If only the brain trust at the Turnpike Authority were equally clear-minded.
Discuss
8 Comments . Comments are closed.Be that as it may, the man is more than incompetent
He is guilty of nonfeasance and fiduciary neglect. In plainer words he is a moron and should suffer punitive repercussions. It may be time for elected officilas to be held to some form of account other than not being elected. But this being Massachusetts, half of the elected officials in the state are either marginal or incompetent. Many are supported by "special interest groups" who push their agenda, either by spending large amounts of money or threatening to break legs. Perhaps next year the voters will "get it" and the Republicans will run candidates who don't fall into the same trap or the same pigeonholes as the democrats.
Not elected
Sorry, your screed is irrelevant; Calvanese was not an elected official, he was appointed.
And he was operating under the directives of a Finance Control Board director appointed by the administration of Republican Mitt Romney -- trying to squeeze every last penny out of the city by investing in instruments that paid a better rate.
LOL
Bob, your wit is showing. Oh, dear is right!
I think it's time for a new Springfield Treasurer...
I will not live to see the day...
...that politicians and movie stars are held responsible for what they do or say. Sometimes their antics are funny. Most times it costs treasure or lives.
What's this business from Mr. National Emergency that his daughters won't be vaccinated, but yours will? That suit gets emptier every day.
The First Suit's done something.
And not just a rubber stamp thing of the last administration. He had his daughters vaccinated. Is this hope or change?
Abridged Version
This is a hugely abridged version of what really happened.
Here is a good detailing of what happened, for those who are interested.
The city's Chief Financial Officer, Stephen Lisauskas, who was hired by the state-appointed Finance Control Board, steered the city's investments to a Merrill-Lynch branch with which he had a personal relationship -- a friend of his worked there. They basically set up an account with the city's money, and the city gave them the directive to "pick instruments that yielded more than Merrill Lynch's money market account as long as the products were AAA-rated by the major credit rating agencies"
The brokers invested money in a fund called "Centre Square Ltd.". That fund was really a Collateralized Debt Obligation (CDO) -- an instrument at the heart of the financial collapse of last year. The brokers purchased the securities without prior authorization by the city, and the city was not told it was investing in CDOs (a term that few people understood prior to the financial meltdown of last year) The brokers were fired for doing this, and the city was reimbursed its losses.
Again, it is important to note that this was a AAA-rated vehicle, until it got hugely downgraded by the ratings agencies once the doors fell off. However, they were still not instruments that could legally be sold to the city. AAA supposedly meant "as good as a government bond".
It is also important to note that the state itself also lost money on Structured Investment Vehicles (SIVS), as did other communities across the country. Those instances just did not get the same amount of press as Springfield.
Now was the treasurer stupid here? Absolutely. However, a lot of treasurers were similarly stupid all across this country. The finance world got very, very complex with the exotic products being offered out there, and especially for the pay grade, I doubt that many municipal employees understand the full gamut of investments out there. If they did, they'd be working as a broker themselves.
I also don't think that the involvement of his direct boss, Stephen Lisauskas, a man appointed by the state Finance Control Board, should go unnoticed. He should have been fired for his actions, in my opinion, because he steered business not based on the good of the city, but based on a personal relationship. Although he was not accused of personally profiting from the deal, it still has the appearance of impropriety.
Calvanese, by the way, is no longer city treasurer.
Excellent information, thanks so much
Very helpful.
And depressing.
Thanks BMG for keeping an eye on Western MA
looks like he was scammed, much like everyone else. However, he should have been keeping up to date with all of the new investment products. If people had been doing that in the first place, it could have helped prevent this from happening.
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