Treasurer Westlund asks Congress to reverse losses to schoolchildren, retirees, and cities in Lehman bankruptcy
House Resolution would let federal recovery dollars compensate for devalued Lehman holdings
From Ben Westlund
SALEM — Oregon State Treasurer Ben Westlund is asking Congress to reverse the losses to Oregon schoolchildren, to state and local government entities, and to the Oregon public pension fund that were caused by the 2008 bankruptcy of Lehman Brothers Holdings Inc.Those Lehman Brothers bonds were highly rated, and were utilized as a highly conservative and safe place to save government funds until needed. Oregon’s exposure to Lehman Brothers assets on Sept. 15, 2008, the date of the surprise bankruptcy filing, totaled $348.5 million. Of that total, $191.3 million was through investments in the Oregon Short-Term Fund, $94 million was in the Oregon Public Employees Retirement Fund, and $1.7 million was in the Common School Fund.
Treasurer Westlund is asking Congress to approve House Resolution H.R. 467, which will require the U.S. Treasury to purchase bonds and other debt instruments issued by Lehman Brothers.
The U.S. Treasury would then take over the corresponding position in the bankruptcy proceeding, and would recover whatever the affected entities would have recovered.
“These losses have jeopardized important public services on which citizens and schoolchildren rely, and put jobs at risk,” Treasurer Westlund said. “This solution is an appropriate use of funds under the Emergency Economic Stabilization Act of 2008, which seeks return America to a stronger financial footing.”
The proposed solution would soften the blow to communities, retirees, citizens, schoolchildren, and states by putting strained public entities in the same position they would have been in, if the U.S. government had provided emergency financial assistance to Lehman Brothers to avoid bankruptcy.
The Oregon Short-Term Fund is used by state and local governments as a place to safely keep tax revenue until needed. State and local services are financed primarily by income and property taxes. Those revenues typically are received during a short window of time, but the public services are needed year-round. So, government entities place dollars in accounts such as the Oregon Short-Term Fund until those assets are needed to pay bills.
The Oregon Short-term Fund was invested only in highly-rated securities — but that classification included Lehman Brothers.