“TCorp has not invested in Collaterised Debt Obligations (CDOs) and has not suffered any loss from direct exposure” – NSW Auditor General, 5-11-08
While the Auditor General has today confirmed NSW Treasury chose not to invest in CDOs linked to the subprime mortgage crisis, they failed to pass this advice on to local councils who lost hundreds of millions in ratepayer funds, said Shadow Minister for Finance Mike Baird.
“The Auditor General’s report today proves the State Labor Government knew CDOs were a bad investment*, so why didn’t they update their investment guidelines to local councils?
“Every council in NSW follows investment guidelines written by the State Government – it is unbelievable that they would neglect to pass on this critical advice from Treasury.
“If they had passed on this advice, ratepayers throughout the State could be at least $200 million better off,” Mr Baird said.
A review of NSW Local Government Investments by Michael Cole (released 2 April 2008) found councils across NSW suffered mark-to-market losses of $200 million through investments made in CDOs.
“In the current environment there is little doubt these losses could be significantly higher,” Mr Baird said.
“Because the State Labor Government failed to update its investment guidelines, NSW councils will not be able to provide a raft of community facilities, and rates are now likely to rise.
“Last month the head of NSW Treasury, John Pierce, admitted the NSW Government decided ‘very early in the piece’** to stay away from risky investments linked to the subprime mortgage crisis.
“It is nothing short of negligence that the State Labor Government would withhold this advice from local councils who diligently follow government guidelines to invest ratepayer funds.
“Here is another example of the State Labor Government failing in its duty to taxpayers and ratepayers across NSW,” Mr Baird said.
MEDIA: Lisa Harrington - 0406 726 880
* Page 121 of Auditor General report Volume Four Report to Parliament for 2008 released 5 Nov. 2008
** Treasury Estimates Committee, Tuesday 14 October 2008 – page 25 of transcript
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