CARSON CITY — Nevada’s general fund could suffer a big hit because of a potential $50 million loss from investments with now-bankrupt Lehman Brothers Holdings Inc., state Treasurer Kate Marshall told lawmakers Monday.
The state invested the money with Lehman in 2007, and was supposed to be paid back with interest next month. But Marshall said the company filed for bankruptcy in September 2008.
At an Assembly Ways and Means Committee hearing, Marshall also said she’s closely watching the state’s $75 million investment in Wells Fargo & Co., which is supposed to be repaid with interest in August.
Wells Fargo recently posted a $13.7 billion fourth-quarter loss, and its stock fell to its lowest level in 12 years after it bought Wachovia. Wachovia Global Securities Lending, which handles securities lending for the state, played a role in the state’s investment with Lehman Brothers.
“I’m watching it,” Marshall said about the Wells Fargo investment after the Ways and Means Committee meeting. “Wells Fargo seems to be well-funded. I’ll continue to watch it, and if I need to take action I will.”
In response to questioning, Marshall told legislators the state has $254 million invested in corporate bonds, all of which should mature in August. That raised concern for Assemblywoman Heidi Gansert, R-Reno, who questioned whether the state should pull out of its corporate investments completely.
Marshall said that if the state withdrew, it would lose potential interest and would pay $1.7 million in fees.
“I was very concerned when the treasurer said we have $254 million outstanding,” Gansert said after the meeting. “Given that we’ve already incurred what looks like a $50 million loss, I believe it would be prudent to reassess that policy and to determine whether we should really have that much outstanding in corporate bonds.”
“I think she should examine whether we should be moving those instruments into even safer vehicles,” Gansert said. “She’ll say they are Grade A or above, but so was Lehman.”