The toxic junk mortgage debt that’s contaminating state pensions in Florida and Connecticut could also be showing up in New York State’s powerful pension fund.
Officials in Albany and in other state capitals are keeping an eye on the unfolding crisis, particularly in Florida, which suffered a Great Depression-like run on its public investment pool last week after a chunk of possibly worthless junk mortgage paper contaminated the pool and a separate pension fund.
New York State’s $154.5 billion pension fund, one of the nation’s largest, said it hasn’t made any direct investments in junk securities but it might uncover “some exposure” in other assets linked indirectly to junk paper.
“We’re reviewing for any kind of indirect exposure, and if there is some, to what extent,” said Robert Whalen, a spokesman for New York State Comptroller Thomas DiNapoli.
He said the state’s real estate portfolio returned nearly 32 percent last year, adding that recent “turmoil in the industry would be reflected” in the March 2008 report.
In Florida’s case, funds were frozen, and withdrawals by towns and local schools seeking to recover their cash were suspended.
The crisis caused a public outcry after Florida’s CFO Alex Sink said the state won’t assume the risk for covering losses of the junk mortgage paper.
Former SEC chief Harvey Pitt was blunt in his criticism. “Garbage is garbage. Once [officials] recognize it’s not fit for human consumption, they have to exercise their fiduciary obligation and get rid of it.”