The Daily Briefing

CAL STATE ECONOMICS CHAIR: DON’T BLAME CITY FOR LEHMAN BROTHERS LOSS

Theo DouglasThu. October 09
 

Last month’s Lehman Brothers Holdings Inc. bankruptcy–just 12 days after the City of Long Beach had spent $19.9 million with the company to purchase a 27-day commercial paper investment–was a shocker for the folks at 333 W. Ocean Boulevard.

But the chairman of the Cal State Long Beach economics department tells the Press-Telegram today that the city should not be blamed for its $20 million loss ($19.9 million invested plus an expected $100,000 return).

(The city also projects an additional $5.8 million expected loss as it moves its investments into safer holdings. That would bring the total loss to $25.8 million.)

“You can’t just simply react on rumor, either in a positive or a negative way,” Joseph Magaddino, the CSULB economics department chairman, tells the Press-Telegram’s Paul Eakins. “Up until the bankruptcy, Lehman Brothers had been a stellar financial institution.”

Yeah, and up until they shot Bonnie and Clyde, Fords were bulletproof.

Eakins follows up on Tuesday’s news of the doomed investment in this morning’s paper.

Word of the loss came out during Tuesday night’s Long Beach City Council meeting when the city issued a press release on the matter–during the council meeting, at the end of the business day–and city Finance Director Lori Ann Farrell informed the council of the massive financial hit.

“Farrell said Wednesday she and her staff had known about the rumors and reports of Lehman Brothers’ trouble before investing the city’s money – which actually amounted to $19.9 million, with an expected $100,000 return, much of which Farrell said will be recoverable,” Eakins writes today.

“Of course we were aware,” Farrell told the P-T yesterday. “We’re on top of the financial markets every day.”

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  • Dave Wielenga
    Whoever is posting under Jim Hankla's name, could you kindly stop? It's bad enough that you don't have the courage to use your own name, and downright despicable to misuse this technology to distort the arguments and take away a man's right to present his own opinions.
  • GoodGovt4?
    I laughed really hard at this ' Hankla' gag because he definitely has made his fair share of istakes over the years ? Like helping give us the worst air in the nation, and a significant part of some outrageous salaries and pensions, etc.. But, given all the grief in this town, on wallstreet, mainstreet and the rest of this world, we can all use a good laugh from time to time ? But I agree, not at another's expense I guess, it's a technical foul I guess, but a funny one. Did he call or something ? LOL

    As for those who use an alias, my experience has been that it is often to provide info on background and not burn various sources, or , to give voice to issues which are just beginning to percolate to the surface for a journalist with access to a forum to consider for a story, I think ? When I first found this site, everybody used a nickname and I honestly thought that it was the only way to fly.

    Why don't you just add 'fake' Jim H in front of this guys post ? or Editors note, this is a spoof.....regardless....good job Dave, as always.
  • wrongbeachJohn
    To anyone who follows "joes" verbal shenanigans, it's clear he has as much credibility on issues as the press-telerags rich and larry, or the unionboss from the chamber. Just another "hack", whose opinions should be considered as highly suspect as the others I listed.
  • CoastalAdvocate
    Economists very rarely know how to run money like professionals because they are steeped in theory, not real world experience. These losses are disgusting. I wonder how our other bond offerings are fairing ? Are we on the road to Junk Bond status again ?

    This CSULB guy lost a lot of credibility with many of us when he lauded the deceitfully wide , yet one sided range of purportedly wonderful benefits that a Wetlands Home Depot would have for all of us , Benefits that actually included thousands of deeply upset citizens, several lawsuits, Coastal filings, years of wasted City Staff time and money, squandered human capital and good will, and much more .

    Recall that he also saw little or no effect upon other similar retailers !! Tell that to the Depot stores closing all accross America and witness their abandonement of all expansion plans as the true indication of some people's opinion. He was wrong then, and probably again here. We have seen Lehman distress for a year or more ? Put all of this on your balance when weighing the facts please ?

    Anyway....Doesn't he have a Conflict of Interest kind of because he has a kid interning on City Staff ? And thus he has an interest and desire to spin favorably for the City ? I sure can't recall him arguing against the status quo ? Could this be because he often get's paid a fee to praise Staff's findings despite broad negative implications upon significant Community or Environmental Interests ? Just wondering ?
  • The Toad
    The posting of the simple internet search done by LB Report should serve to expose the laziness/incompotence of somebody at City Hall! If Pat West doesn't hold somebody accountable ( as in termination from city employment ), then the Mayor/City Council should terminate him! It may not bother Joe Magaddino to see the city piss away almost $20Million, but this taxpayer is irate as hell.
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