Palm Beach County’s Financial Report – 77% of Portfolio Invested in GSE’s / MBS’ / CMO’s?

If there are any accountants out there, please tell me I am interpreting this incorrectly…

So I was looking into how bad this Foreclosure Crisis is and decided to take a look at one of the local County’s financial records and now I wished I didn’t…

According to the Palm Beach County’s 2009 Comprehensive Annual Financial Report, it appears that they have well over half of their $2.5 billion investment portfolio invested in GSE’s, ( Government Sponsored Enterprises) MBS’, (Mortgage Backed Securities) and CMO’s (Collateralized Mortgage Obligations)?

Highlights from the report…

As of September 30, 2009, the primary government had the following investments,
subject to interest rate risk using the segmented-time distribution method:

Credit Risk
Credit risk is the risk that an issuer will not fulfill its obligations.

Concentration Risk
Concentration of credit risk is the risk of loss attributed to the magnitude of an
investment in a single issuer.

How many other counties are in a similar financial position?

I bet most.

What does this mean?

I think everyone is in much more trouble than we think…

Feel free to dissect the report below in the comments…

My head hurts…



Palm Beach County’s 2009 Comprehensive Annual Financial Report




6 Responses to “Palm Beach County’s Financial Report – 77% of Portfolio Invested in GSE’s / MBS’ / CMO’s?”
  1. lisamarie says:

    Oh my this is scary, whats to stop them? Its like asking the investor to sink his own investment, even if its the right thing to do! Thats not gonna happen.

  2. Jesse says:

    Here is another interesting article I found again, hurting the homeowners and helping the bank.


    Monday 14 June 2010

    by: Dean Baker, t r u t h o u t | Op-Ed


    The right showed once again that they have no allegiance whatsoever to the free market when House Republicans pushed through a bill that would prohibit the Federal Housing Authority (FHA) from insuring the mortgage of anyone who had “strategically defaulted” on an earlier mortgage. The intention was to punish people who had taken advantage of this option and, therefore, make it less likely that others would go this route in the future.

    A strategic default is when a person stops paying a mortgage even when they can still afford it, and, instead, turns the house back to the lender. This can be a desirable move for borrowers if the price of the house has fallen below the value of the home due to the collapse of the housing bubble.

    In many states, a mortgage is a nonrecourse loan. This means that, under the terms of the contract, the return of the home ends any commitment to the lender. Even in states where the loan is a recourse loan, it is unusual for lenders to pursue actions against borrowers after a foreclosure, even if they have not recovered the full amount of the mortgage by reselling the house.

    For these reasons, a strategic default can often be a good option for homeowners. In fact, strategic default is a standard business practice. Businesses often default on a mortgage and turn the property back to the lender when they decide that this is the more profitable route to follow. For example, Morgan Stanley recently went this route with five office buildings in San Francisco, the value of which was considerably less than the outstanding mortgage.

    But Republicans in Congress aren’t interested in leaving things to the market. They were concerned that too many homeowners were acting in their own best interest and, thereby, hurting the banks. So, they decided to have Big Government step in and create an additional sanction for homeowners who strategically default.

    This impact of this bill, even if it goes into law, is likely to be primarily symbolic. There is no easy way for the FHA to determine if a default was strategic. However, this does show clearly the Republicans contempt for the free market and the sanctity of contract: principles that many of them purport to hold dear.

    After all, banks presumably understood the risk of default when they issued the mortgage. They understood that house prices could drop, giving homeowners an incentive to default. The banks should have incorporated this risk into the interest rate they charged on the loan.

    Now that the risk is turning many mortgages into bad bets for the banks, the Republicans want to rewrite the rules to the benefit of the banks. Are we to believe that the boys and girls at Citigroup and J.P. Morgan didn’t understand the terms of the mortgages they were issuing? Do the CEOs of these huge banks need a government bureaucrat to hold their hands and explain the terms of these mortgages to them so that the banks understand the risks they face when they issue a mortgage?

    This is not the only case where the government is actively interfering in the market to help big corporations. Many of us were struck to discover that BP faces a liability cap of $75 million from its oil spill. This means that the government has given BP the right to do tens of billions of damage to people’s property, livelihood and lives and walk away with a tab of just $75 million. In what world is this a “free market”?

    There is a similar liability cap for the nuclear industry. The Price-Anderson Act limits the liability from an accident to $12 billion. This means that people will not be compensated for any damage that a nuclear accident causes in excess of this amount, unless they get the taxpayers to foot the bill.

    Again, where is the free market here? For those who think that nuclear power is a safe and clean form of energy, why not let the industry just buy insurance on the market like any other industry? If the market won’t provide insurance at an affordable rate, is there some reason that the government should step in and make an otherwise unprofitable industry commercially viable?

    There are endless more examples of the government actively intervening in markets on the side of the rich and powerful. This is not a surprise to those who follow politics. The only surprising part is that somehow those who routinely support such interventions can get labeled as advocates of the “free market.”

    This is not just their own labeling. Progressives routinely denounce their right-wing opponents as “free-market fundamentalists.”

    It is absolutely baffling why progressives would help the right clothe policies, the unifying theme of which is only that they serve the interest of the wealthy as a principled commitment to the market. A principled commitment to the market is a view that has appeal to a broad segment of the population. The real priority of the right – a commitment to serve the interests of the rich and powerful – will only have appeal to the rich and powerful.

    Progressives have to stop doing propaganda service for the right. There are no free-market fundamentalists here; everyone recognizes the need for a big role for government in the economy. The debate is over whether we want the government to serve the needs of the bulk of the population or just the purposes of the rich and powerful. Progressives must stop helping the right hide its real agenda.

  3. Jesse says:

    What we have here is a direct conflict of interest with all rulings regarding foreclosures. Orange county Florida is the same way. Except they have over 10 billion invested with the banks.

    The fact of the matter is the judges and clerks retirement funds are influenced directly by the performance of their portfolios. So judges that rule in the defendants favor are ruling against their own retirement funds. Just as the recusal of the judge stated, her direct decisions affect the banks stocks and in turn she rules in favor of the banks which in turn assures her investment wont go away.

    As a pro se I am making sure this information gets to the public via local news investigations. There is no way anyone can get an impartial trial with judges retirements on the line. Its called self preservation!

    If you go on Dunn and Brad Street you will find that all of the agencies, courts, G=FBI, CIA, IRS, and the bunch are all publicly traded on Wall Street. They are all corporations for profit. The big question is how are you making your profit? Off the people hard work that’s how.

    The whole system is a scam and there is no more justice, its been lost to greed and corruption.

    God help us all,


  4. Elyse says:

    You are so right on target!!

    If every County, in every State, published their “realities”, the people would finally have their “light bulb” moments and the real fight can begin!! We are in a mess, big time! And…we are going down!!

    I was told by several Attorney’s that the fraud being perpetrated on the American homeowners is the only way out for the banks and MERS!!! The Feds will not go against MERS cause MERS is Wall Street Bankers!! We, the American homeowner, is being sacrificed…we’re just the “little people” who pay taxes and buy the goods and services offered in our controled enviornment….it’s the plan for “us” to go down so the banks/government will not!!

    Hold on people, we are in for a mumpy ride!!

    Ahhh…the good old days!

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