WASHINGTON - The collapse of Lehman Brothers Holdings Inc. has forced Sarasota County to slice library and transit budgets and forgo new parks and a fire station, the county's comptroller this morning told a House committee looking at providing federal assistance to similarly strapped state and local governments.
Karen Rushing told the House Financial Services Committee that Sarasota was holding about $40 million in Lehman investments when the company fell into bankruptcy last November and that an economic analysis estimates that for every $10 million in losses, the local economy lost 95 jobs.
She and several other county officials from across the country are encouraging the Treasury Department to cover the losses with money from the Troubled Asset Relief Program, the $700 billion federal bailout for troubled institutions. She also called on the committee to back a House bill that would require Treasury to purchase bonds issued by Lehman that were held by state and local governments.
"The decision to treat Lehman Brothers financial situation differently than other failing financial institutions resulted in devastating consequences on state and local governments,'' Rushing said.
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She said the country has taken an "unrealized loss'' in its accounting books, but has yet to sell the Lehman bonds.
"We're holding them now, trying to determine what to do next,'' she said of the bonds that represented less than 5 percent of the county's investment pool.
Rep. Anna Eshoo, D-Calif., a co-sponsor of the legislation requiring Treasury to purchase government-owned Lehman assets, said in prepared testimony that no TARP dollars have been spent to assist local governments, though governments in California, Florida, Colorado, Michigan, Missouri and Arizona have been effected.
"It's been said that some banks are too big to fail,'' she said."It can also be said that counties, school districts and cities are too small to be noticed.
"To date,'' she said, "Lehman Brothers is the only financial institution that was allowed to collapse and our schools, public safety, and social services will suffer if we don't return these dollars back to our local governments.''
Not every lawmaker on the panel was sympathetic.
"You guys were chasing yield,'' Rep. John Campbell, R-Calif., said after noting that the governments could have invested in less riskier ways. "There's nothing wrong with that, but with that comes risk.''
And he argued that the TARP bailout was aimed at stemming systemic failure, preventing the banks from failing.