The Municipal Association of Victoria (MAV) claimed that six Victorian councils were incorrectly named in The Age last Saturday in an exclusive story that detailed organisations facing financial losses due to US subprime investments.
The newspaper claimed the councils’ had investments with global investment bank Lehman Brothers that were exposed to the subprime mortgage finance market through collateralised debt obligations (CDOs).
MAV president Dick Gross, said that The Age had got it wrong.
“Victorian local government has the strictest investment guidelines for councils across Australia. The legislation prevents investments in funds with subprime market exposure.
“According to the report, documents seen by The Age did ‘not reveal councils’ latest subprime exposure’. That’s because there is no exposure.
“Since investment powers were amended in 1998, local government in this state has only invested in funds and trusts with an AAm or AAf Standard and Poor’s rating, where the trustee is both a registered trustee company and independent of the funds manager.
“While The Age did contact a number of councils prior to printing its story, it still chose to run both misleading and accusatory information.
“None of the Victorian councils mentioned in the story has invested in CDOs, and most do not even have funds under management by Lehman Brothers. These are not denials, they are facts,” he said.
The councils named in the story include Wellington Shire Council, City of Greater Bendigo, Hobsons Bay City Council, Greater Shepparton City Council, East Gippsland Shire Council and Maroondah City Council.
“It is grossly misleading to represent that an organisation who lawfully invests in cash funds or other products managed by Lehman Brothers (or Grange Securities), or who uses their brokerage services must also be exposed to the subprime market,” Cr Gross said.
“In the case of Wellington Shire, there can be no excuse for falsely alleging the council is facing losses from investments with Lehman Brothers, when they haven’t even dealt with the institution.
Cr Gross said Victorian local government is not affected by the collapse of CDOs.
“All investments are undertaken in compliance with the prescriptive investment powers outlined in the Local Government Act.”
To view the offending article in The Age click here.
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