Cheer and good tidings first; light reading last

• Charlie Crist calls for an investigation of “Florida’s subprime-tainted fund.” It’s really a SIV tainted fund and a sub-prime tainted SIV, but I’ll spare you the details. More on the Florida Fund fiasco here, here, and here.
• Research In Motion: no slowdown. Is it a consumer thing? Personally, I’m very happy with my Blackberry, although I consider it a business tool.
• Myspace. Facebook. Go Wordpress!? This may sound a little outlandish now, but the open source blogging application has the install base and the development community to really put a hurting on the “traditional” fare.
• A Home Price Heat Map, compliments of Stephen Heise. Data runs from 1975 to Q3-2007. Very interesting - hit the pause button along the way.
• A reminder: next time you look into that camera someone might be recording the color of your eyes, among other things.

Again, happy holidays!

Actually, it started off horrible, then things started looking up. Now disclosure questions are making things look bad again.

At least in the US. Branches of Northern Rock were where the first official runs took place, but the Northern Rock is UK based. And this case isn’t exactly a bank, but it might as well be (particularly if you are a local government in Florida).

The State of Florida runs an investment pool for its local governing bodies, and that pool just so happened to toss a lot of cash into a structured investment vehicles. “Structured investment vehicle” is a fancy way of describing a pile of commercial paper with a few odds and ends thrown in to enhance returns. The odds and ends are generally all the paper nobody still breathing would buy for more than a nickel on the dollar if marketed to them directly. These structured investment vehicles have taken a nasty hit to their credit ratings, and true value is in question.

As a result, all those local governments are taking no chances - they are withdrawing their money in droves. By droves I mean the following: two weeks ago the fund had $27 billion in it - as of this morning, the tally stood at around $19 billion.

I’d call average capital withdrawals of 15% per week a…uh…run on the fricken bank. Of course, the state has to actually sell investments to generate the cash for all those withdrawals, and seeing as SIVs are getting bailed out by their proprietors (again, as nobody wants them), I suspect Florida is selling some of their assets at tidy losses.

There is a solution, so to speak, to all this…file the puppy:

Should the withdrawals continue, Florida’s pool may have to consider filing for bankruptcy protection, says John Coffee, a securities law professor at Columbia Law School in New York. “A bankruptcy could handle these kinds of problems if they feel they’ll become insolvent,” he said.

Mr. Coffee is spot on - filing will stave off the run, but it also means the funds would be frozen by the court until the matter is resolved. When it comes to financial assets resolution generally means orderly liquidation, or everyone sitting around with their thumbs up their behinds, simultaneously hoping the remaining assets rise in value and paying bankruptcy attorneys virtually every dime of any increase. In addition, any local governments that pulled their money out in the last few weeks might be forced to return it or suffer many preference payment lashings at the hands of the U.S. Bankruptcy Court. I can see them all buying twenty-year supplies of textbooks and container loads of new chalkboards right about now.

Meanwhile, I hadn’t reached the third paragraph of the news when I thought “who’s going to file the lawsuit, the state or the municipalities that don’t get out in time?” Who knows for sure, but the experts are presumptive:

Coffee predicts the pool will likely file lawsuits to recover losses. “I’d expect the pool is going to sue the people who sold them the commercial paper, saying the risks were hidden,” he said.

While the state bears some burden of doing their due diligence, there’s a pretty good chance the risks were hidden too. The finance industry has a nasty habit of overlooking needed disclosure when they’re trying to get the next, best, hot product out the door. I’m going to go out on a limb and suggest this case follows the rule rather than the exception, and even if it doesn’t there’s a pretty high likelihood lawsuits will be flying anyway…this is America we’re talking about after all.

Lehman Brothers Holdings Inc. sold Florida most of its now default-rated asset-backed commercial paper. Lehman spokesman Randall Whitestone declined to comment.

Declining to comment, particularly when said declination comes from a spokesperson (whose sole job it is to comment), can usually be interpreted as “We’re lawyering up, and will call you when counsel has blown through a few retainer checks.”

There are two concepts worth keeping in mind here: 1) Florida isn’t the only government that is having this problem - it’s just the first; and 2) I don’t own any Lehman Brothers Holdings, Inc. common stock.

UPDATE: As of Thursday morning, the State fund has halted withdrawals, but not until after an additional $3 billion was pulled. Executive Director Coleman Stipanovich noted:

“There is no liquidity out there, there are no bids” for those securities.

Translation: the political damage from stemming the withdrawals is less than the losses that would otherwise be incurred from liquidation.

UPDATE 2: Participants in the Florida pool are now…what I’ll call “nicely demanding“…a hundred cents on the dollar for their deposits. You might also call this “wishful thinking.”

UPDATE 3: Having trouble paying teachers.

The Florida legislature is pushing through a measure that would….make false or misleading spam a crime. According to the local news report, Florida’s current law doesn’t include criminal penalties, and this latest bill would also allow civil recourse for victims and the state AG.

I am still waiting for some governmental body, someplace, to craft a “throw the book at them” law, instead of these piecemeal attempts that need annual reworking. Guess legislators need something to do each session, eh?

No doubt this is going to be fun. In the capital of spams and scams, the kingpins are preparing for the next wave - unleashing broad-based advertising to mobile phones.

An ISP in Clinton, Iowa just won an $11B judgement against some Florida spammers. That is a lot of pills and patches…too many.

I like the idea of “breaking the bank” of spammers, but I find this number a bit “irresponsible.” First, it is never going to get collected. Second, the enormity of the number is going to entice small ISPs everywhere to clog up the legal system looking for their take (think Mark Mumma, who we haven’t heard much from lately). A whole new legal practice industry is about to explode around spam lawsuits - I bet the keywords “spam+lawsuit” is already rising in price over at Google Adwords.

A number like $11 MILLION might have been more appropriate. At least it wouldn’t have attracted the soon to be unwanted attention.

Citizens in Florida should watch the latest insurers’ rate requests closely, as it is going to affect everyone. At least one large insurer (Allstate Floridian) has already been denied a rate increase - more denials are going to force carriers out the door, reduce competition, and result in higher rates anyway.

Allstate highlights the issue in the fine print:

It’s important to note that Allstate Floridian Insurance Company and Allstate Floridian Indemnity Company are separate and distinct companies from each other and from all other companies in the Allstate group.

Why? Because it gives them protection in case of more catastrophic losses - the option of walking out of the market is better than bankrupting the rest of the company.

Politicians in Florida may think they are doing a good thing for consumers by artificially keeping rates low. But, the less choice the citizen has, the less risk is spread around, and the more rate increases will flood in. Continued denial is just delaying the inevitable.

Markets work, given the leeway to. Players should embrace them, rather than try and control them. Meanwhile, Floridians need to come to grips with the fact that they live in a dangerous place, and they can’t expect someone to carry their risk, at below cost, forever.

A Republican gubernatorial candidate in Florida needs a lesson from Merriam-Webster - the definition of hypocrisy will do. Charlie Crist, Florida’s Attorney General, has hard slapped more than one spammer in the much-touted spam capital of America, but he may now have to set his crosshairs on his own campaign staffers. They used a list garnered via a public records request to send campaign emails to folks who opted-in for messages direct from the Governor’s and AG’s offices. Of course, they scrubbed the list for state employees, but never ventured to think “Hey, I wonder if any of these folks are pissed off Democrats.” The list is likely now full of exactly that.

Crist’s political director, Arlene DiBenigno, said “It’s not spam, it’s political speech. We’re not selling anything, we’re not being deceptive. We love the First Amendment, and there’s nothing more powerful than political speech.” Ms. DiBenigno probably read CAN-SPAM, and figured it was all ok (hence the references to “selling anything” and “deceptive”). Now its REALLY “public record,” and going to backfire, but at least she’s not blaming the fiasco on someone else.

***UPDATE***

As it is turning out, little ol’ ladies from Land O’ Lakes weren’t the only ones getting spammed by Crist’s bunch. Joe Spooner, an investment advisor, got caught up in it too. He tried tried unsubscribing five times, and then threatened to file a complaint with…get this…the Florida Attorney General’s Office. Ha.

Now they have another spokesperson doing the talking - a Ms. Vivian Myrtetus. She’s about as clueless as Ms. DiBenigno. “This is not spam. This is truthful, it’s straight forward. We’re honest. To be spam it has to be, under Florida law, defined as being deceptive.”

I just love the double standards when it comes to political manuevering.

Two Florida men were just charged in a major crackdown in the Sunshine State. While their exploits included the usual forging of headers, spoofing of IP address, and other no-no’s, they went a few steps further into the black pit of legal despair.

Among the spammed products, tobacco products and e-books. Still listening - they attempted to distribute pharmacy products, without a license. Have I lost you…purportedly pirated movies. I bet the shenanigans don’t end there.

While this seems to have been a relatively small time operation, with less than a hundred thousand emails dispensed, they have dug a deep enough hole with the offerings to keep their lawyers busy for many moons.

McWilliams has a nice little writeup on the issue over at Spam Kings Blog: DotComBoiz in big trouble.

You can also catch the story straight from the “boyz” neighborhood news here: Two Tampa men become first charged under anti-spam law, although the folks down south didn’t quite get the definition of spam correct. As the Floridians put it, “Spam is defined as deceptive email with a false heading meant to try and lure the victim someplace else.” Not exactly. It is any unsolicited email, regardless of how it is delivered or how it functions, just in case you forgot.

*****UPDATE*****

The State of Florida won their injunction against the DotComBoiz. Congrats!