Subprime crisis in your insurance company?

Last year this blogger dipped into financial fiasco several times as the subprime crisis began to affect Florida’s public bodies. That is: Your tax dollars had been whacked right out of the savings accounts of school districts, county agencies and city governments and sent to perdition.

New stuff trickles out from time to time, so here’s a little roundup. I pause to say that this is probably far from complete, as other stories may be coming out every day. It’s just that they are hard to recognize, disguised under headlines like this one in the Miami Herald, “Citizens discounts millions.”


What’s that supposed to mean? Well, it’s talking about Citizens Property Insurance, which you may know as the largest insurer of homes in Florida, a state-run company to which you probably pay premiums.

What does “discounts millions” mean? It means that $88 million that used to be in Citizens’ accounts to pay your claims and otherwise do business isn’t there anymore. That is, an investment that used to be so solid that it was like cash now doesn’t sell, so it has to be downgraded to nothing on a balance sheet.

Who’s to blame? Start with Jeb Bush, who managed this for two terms as governor and now is a consultant for Lehman Bros., which sold a ton of subprime stuff to Florida. Talk about a conflict of interest! While in office Jeb was a trustee of the State Board of Administration, which is like a bank or money market fund for government bodies to park their money, and now he’s “advising” the company that sold bad investments to the SBA.

Back in December some bloggers were demanding that Jeb disclose the details of his contract with Lehman. Heard anything? Jeb! Speak up! Can’t hear you!

The reader may be baffled. Haven’t heard of this? Try Googling “jeb bush lehman brothers” and see what’s under the rock.

Next item: The NY Times business section on Tuesday had a front-page story with the headline “High Finance Backfires on Alabama County.”

Again, the headline is a little obfuscatory. The county in question is Jefferson County, home to Birmingham, the largest city in Alabama, so not exactly some remote place out in the sticks. Ought to have some people with financial acumen.

Nonetheless, they are in danger of going belly-up. The whole county. The subprime thing hit them with $5.4 billion worth of funny investments. A ton of swaps. Exotic bond deals. Interest rates ballooning like those funny mortgages for poor folks.

Next item: If we’re lucky to be doing better than Jefferson County in neighboring Alabama, thank goodness we’re not in the private sector, where the numbers can be much higher. Here’s Carlyle Capital Group defaulting on $16.6 billion. Pretty soon this is going to add up to real money.