Florida Halts Withdrawls From Municipal Investment Fund; Cities Spooked By Level Of Subprime Junk Investments

In Florida, the South Florida Sun Sentinel reports:

• In an effort to halt what one official called "an investment world version of a run on the bank," state officials froze withdrawals Thursday from a $27 billion investment fund that local governments drained by almost half during the past two weeks.

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• The state-run program allows local governments and agencies to combine revenues in short-term investments at low financing costs, while earning interest with easy access to the money to pay bills. Earlier this month, the state notified local finance directors that some investments were exposed to sub-prime mortgage risk.

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• The freeze, in effect until Tuesday, was ordered by the State Board of Administration, composed of Gov. Charlie Crist, Chief Financial Officer Alex Sink and Attorney General Bill McCollum. The SBA, which manages the fund that on Nov. 15 held about $27 billion, was left with a little more than $14 billion Thursday night.

For more, see State freezes 'run on the bank' at investment fund (when link expires, try here).

For yesterday's post on this story, see Some Municipal Governments Bailing Out Of Subprime Investments.

For a related story from Bloomberg, see Public School Funds Hit by SIV Debts Hidden in Investment Pools (11-15-07).