Texas cancels its Lehman contract
September 18, 2008
Comptroller Susan Combs said Wednesday she has ended Texas' contract with Lehman Brothers Inc. to provide marketing and client services to TexPool and TexPool Prime, the state's investment pools for local governments.
Written by Clay Robison, The Houston Chronicle
AUSTIN — Comptroller Susan Combs said Wednesday she has ended Texas' contract with Lehman Brothers Inc. to provide marketing and client services to TexPool and TexPool Prime, the state's investment pools for local governments.
She said Lehman provided only marketing services, not investment management, and that Lehman's bankruptcy filing earlier this week posed ``absolutely no threat'' to local governments' holdings in the pools.
Investments total $17.6 billion in TexPool and $1.4 billion in TexPool Prime.
The state oversees and audits the investment pools, which are designed to reduce investment costs and to provide greater returns for cities and counties that participate.
Combs said the investments are managed by a separate company, Federated Investors Inc., but noted that termination of the Lehman contract was necessary to maintain the confidence of investors.
Lehman Brothers Inc. is owned by Lehman Brothers Holdings Inc., which filed for Chapter 11 bankruptcy protection Monday.
“Investors are currently suffering the effects of one of the greatest crises of confidence in the capital markets in recent memory,” Combs said.
“Given Lehman Brothers' declaration of bankruptcy, the fragile state of the capital markets and the heightened sensitivity of investors to adverse news, the continued affiliation of TexPool with Lehman Brothers is unacceptable.”
Lehman Brothers has 30 days to move its marketing and client services, which it had provided for TexPool since April 2002, to Federated Investors.
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