The Huckster and the Wreckage

It was a classic run on the bank. Until his recent resignation under fire, Coleman Stipanovich, a Bush loyalist, headed the Florida State Board of Administration, responsible for investing billions of dollars of state funds. Stipanovich’s brother, “Mac”, is a former chief of staff in the governor’s office, Jeb Bush campaign manager, and now partner in the law firm, Fowler White, Boggs-the Tallahassee lobbying whip of the Growth Machine (he is also board member of US Sugar).

Jeb Bush left Tallahassee for Miami in January 2007, having served two terms as governor. He incorporated Jeb Bush & Co., and in June was hired as a consultant with Lehman Brothers, the Wall Street investment banking firm.

In July and August, Stipanovich approved the purchase of $842 million in securitized mortgage bonds from Lehman.

Today the value of those bonds is practically zero, vanished in the debt crisis that is tipping the national economy into a recession.

So far, the media is buying the state spin: that Florida’s municipalities made their own decisions to invest with the state government investment pool. Senate President Ken Pruitt, another Bush loyalist, huffily defended the state investment pool with Indian River county officials, “No one put a gun to your head.”

But that is only half of the story, as any investor knows: the other half is that the state was fiduciary and obligated to invest those funds within tolerable risk parameters.

Any fiduciary that bothered with due diligence could see in the overdevelopment of Florida that the bubble in housing markets would pop, and that financial instruments that created the bubble would vanish into the ether.

The mortgage derivatives were only as good as their ratings, and their ratings and insurance were administered through incestuous relationships with originators on Wall Street, like Lehman.

The suburban housing bubble was a function-not of market demand-but of insider politics and campaign contributions that persuaded everyone involved to “mis-price risk” (risk to families, risk to wetlands, risk to government infrastructure budgets) leading to the theft of quality of life, the environment, and an equitable future.

Most of all, the speculative boom depended on very risky mortgage derivatives, exactly those investments in Florida and everywhere else that are disappearing in puffs of smoke. The implosion in housing markets could have been seen from the Space Shuttle.

Jeb and the laws of predetermined outcomes (it is a family trait, to expect that reality will conform to expected results, as expressed best by Karl Rove to the New York Times in 2002: “We’re history’s actors and you, all of you, will be left to just study what we do.”) are the model or prism through which even the lowliest city and county commissioners understand their roles.

Floridians are owed an explanation to certain questions related to those July and August sales: did conversations take place, between state investment managers and Bush after he was hired by Lehman as to investments? Did those investments comprise mortgages sourced by Florida developers who contribute to Republican campaigns? How was Jeb Bush compensated by Lehman: was it a monthly retainer, a “success” fee, or was he paid a commission on the sale of those bonds? Did Lehman in 2007 make contributions to charities or organizations related to Jeb Bush or his loyalists?

These are questions are as legitimate as the fine print on the deal to publicly finance a new condo on the bay or professional baseball stadium in Miami, in which the votes of local commissioners may or may not have been bought off.

The behavior of the anti-Robin Hoods in low places only reflects what happens in high places, where disaster capitalism is held in esteem.

In the case of Lehman and the State of Florida, not only is the money gone but the commission and fees on those bond deals are gathering interest in someone else’s bank account.

ALAN FARAGO of Coral Gables, who writes about the environment and the politics of South Florida, can be reached at



Alan Farago is president of Friends of the Everglades and can be reached at