Hawaii investment in auction-rate bonds loses $250M in market value
Bloomberg News Service
Two years after the auction-rate bond market froze, Hawaii has lost about $250 million in market value on $1 billion in student-loan securities sold by a single Citigroup Inc. broker as a cash substitute that the state has had difficulty unloading, Bloomberg News Service reported.
Hawaii purchased half of the securities for its short-term treasury account from Honolulu broker Pete Thompson, 60, in the eight months before the market collapsed, according to Scott Kami, an administrator at the state finance department.
The transactions came while Citigroup was increasing brokerage commissions and traders were being told to “make sure all hands are on deck” and “do whatever is necessary” to dispose of auction-rate bonds as the $330 billion market began to fail, according to a 2008 U.S. Securities and Exchange Commission complaint against the New York-based bank in a separate case related to sales of the debt.