[StBernard] Treasurer's Update - March 2009

[Westley Annis]

LATreasury.com Update

2009 is in full swing, and we have been very busy at the Louisiana
Department of the Treasury. We are moving ahead with many new projects, and
we will continue to address issues that are important to you and all
Louisiana taxpayers. I would like to take a moment to tell you about a few
new Treasury initiatives and some of our recent accomplishments. 

UNCLAIMED PROPERTY

Our Unclaimed Property Program continues to be a success. For fiscal year
2008, the Treasury collected $53.8 million in unclaimed property. This is
the largest amount of money the state has ever collected in a single year.
In 2008, we returned an all time record $21.7 million to more than 18,800
rightful owners. The Treasury still has more than $400 million that needs to
be claimed. To see if you have unclaimed property, please visit
www.LATreasury.com <http://www.latreasury.com/>  or call 1-888-925-4127. 


START COLLEGE SAVINGS PLAN

The START 529 college savings program is growing by leaps and bounds. START
is a great investment tool for saving for a child's higher education
expenses at any approved university, vocational-technical school or
community college. In 2001, we had a little more than 3,000 account owners.
At the close of 2008, with the help of the Treasury, START has grown to
32,000 accounts and $185.6 million in total assets. The rate of interest on
START's Louisiana Principal Protection Option for this past calendar year
was 4.65 percent. The program's Earning Enhancements rate for that same
period was 4.39 percent.

START has been ranked the nation's best 529 college savings plan in the
five-year performance category. A recent nationwide analysis conducted by
savingforcollege.com, compared performance figures from a subset of
investment portfolios for all 529 plans across the country. START ranked
first nationwide in five-year performance and second nationwide for
three-year performance.

HURRICANE IKE GOZONE

The State Bond Commission approved the first project from a new $383.9
million GO Zone program for Hurricane Ike. The commission gave preliminary
approval for $25 million in Hurricane Ike GO Zone bonds to expand Farmer's
Rice Milling Company, Inc. and rebuild an existing facility that turns rice
hulls into electric power in Calcasieu Parish. 

Businesses in 20 Louisiana parishes can now access tax exempt GO Zone bonds
to help pay for losses resulting from Hurricane Ike. This program enables a
private business to use the state's tax-exempt borrowing authority to borrow
money at a low interest rate in order to help pay for repairs. 

Unlike the original GO Zone Act of 2005, the emphasis on the Hurricane Ike
GO Zone program is strictly on the repair of existing businesses, facilities
and housing. The new program does not include funding for the expansion and
development of new businesses or housing. 

The following parishes qualify to participate in the Hurricane Ike GO Zone
program: Acadia, Allen, Beauregard, Calcasieu, Cameron, Iberia, Jefferson,
Jefferson Davis, Lafourche, Livingston, Orleans, Plaquemines, Sabine, St.
Martin, St. Mary, St. Tammany, Tangipahoa, Terrebonne, Vermilion and Vernon.
The deadline for issuing GO Zone bonds for qualified projects is December
31, 2012.

Commentary by 
State Treasurer John Kennedy

By now, we all know the main causes of America's credit crisis: lenders who
made home loans to unqualified borrowers; borrowers who could not repay the
loans; Wall Street investment bankers who packaged the loans into toxic
mortgage-backed securities (MBS) that were sold worldwide; and institutional
investors who gorged on MBS without regard to risk.

Below are other, less well known causes of the credit crisis that you may
not have heard about.

1. Failure to Regulate After LTCM. Long-Term Capital Management was a hedge
fund that blew up in 1998 after losing $4 billion investing in complex
derivatives, necessitating a federal bailout. A movement quickly began to
regulate derivatives like MBS through the Commodity Futures Trading
Commission, but then-Fed Chairman Alan Greenspan, then-Treasury Secretary
Robert Ruben and others blocked those efforts, which helped set the stage
for the 2008 meltdown.

2. Repeal of the Glass-Steagall Act. In 1999, Congress repealed the
Glass-Steagall Act of 1933 after the financial services industry gave more
than $80 million in campaign contributions to members of Congress on both
sides of the aisle. The repeal eliminated the separation of commercial and
investment banking mandated after the Great Depression. This allowed big
banks to get even bigger and subjected depositors to the risk of a whole new
array of speculative investments, such as MBS and other derivatives.

3. Failure to Rein in Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac
are private companies backed (and now owned) by the federal government that
buy home mortgages from lenders who originate them, thus providing liquidity
to the U.S. mortgage market. These companies also created, sold and invested
in billions of dollars of MBS and, more than any other player, fueled the
MBS market. In 2005, after an accounting scandal at the companies, Congress
sought to more closely regulate Fannie Mae and Freddie Mac and prohibit them
from owning MBS. The bill failed to pass. Fannie Mae and Freddie Mac then
increased their costly participation in the MBS market, which eventually led
to their takeover by the federal government.

4. SEC Let Banks Pile Up New Debt. In 2004, the five largest Wall Street
investment banks convinced the SEC to exempt their brokerage units from an
old regulation (the "net capital rule") that limited the amount of debt they
could take on. This unleashed the Wall Street firms to borrow billions of
dollars to invest in MBS, credit default swaps and other risky, exotic
securities. Bear Stearns, for example, was leveraged 33 to 1 when it melted
down-for every $1 in capital it had $33 in debt. Lehman Brothers' $613
billion in debt made its bankruptcy the largest in U.S. history-10 times
larger than Enron.

5. Abuses of the Community Reinvestment Act. Congress passed the Community
Reinvestment Act in 1977, and revised it in 1995, to encourage banks to make
home loans to lower-income customers, in part to expand home ownership. The
intentions were good, but abuses led to unsafe lending practices, which led
to many defaults and contributed to the 2008 credit market meltdown.

Past does not have to be prologue if we learn from our mistakes.

I have been traveling the state speaking to various clubs and organizations
about problems with the state's budget. The focus of my talks with taxpayers
is the need for Louisiana to start budgeting for results. 

The state's budget has ballooned and continues to grow, but the state does
not use these dollars wisely. I will continue to speak over the next few
months about this issue and how Louisiana needs to budget more efficiently
to get results for taxpayers.

I will be following up with you about important issues coming up in the
legislative session. As always, please contact me with any ideas or
suggestions you have by calling (225) 342-0010. You can also reach me by
email at comments at treasury.state.la.us. I appreciate your continued support,
and look forward to working with you to make Louisiana the best place to
live and raise our families.


JOHN KENNEDY