The recent financial crisis on Wall Street is now being felt on Main Streets across the country.
Although we won’t know the long-term impact on the state’s portfolio, Illinois has avoided taking a hit during the recent market meltdown by not investing in the failed investment firms or in the sub-prime mortgage market.
As the state’s chief investment officer, my goal has been to pro-actively protect taxpayer money, diversify investments and employ sound policies that emphasize safety and security. Many other states that have chased high yields and exotic returns have gotten into trouble. They’ve been left with big losses and taxpayers in those states may have to pay for it.
Still, as investors dump risky equity instruments, they have been buying up treasury and agency securities that are safer because they are backed by the federal government. This has resulted in a “flight to quality,” which causes the prices of the securities to go up, while rates and yields go down.
The economic downturn will likely produce a smaller surplus of state funds available to invest. That coupled with declining rates of return will result in a significant reduction of investment income in the next few years.
Moving forward, Congress needs to demand protective oversight and accountability to limit financial firms from accumulating large amounts of bad debt and subprime mortgages.
ALEXI ON NATIONALLY TELEVISED “NEWSHOUR WITH JIM LEHRER”
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Watch Alexi tonight during PBS’s “NewsHour with Jim Lehrer” as he discusses how the current credit crunch is impacting Illinois’ economy and state budget. The segment will air tonight at 6 pm (CST) on Chicago’s WTTW-Channel 11.
Minor note–there are more PBS stations than just WTTW in Illinois. It’s the downstater in me.
I’ll get the video of the segment tonight one way or another.
…There are more PBS stations than just WTTW in the Chicago area…