Projo 7 to 7 News Blog

State Treasurer Frank Caprio said today that the state has taken steps to ensure that it's protected from turmoil in the country's financial markets brought on by the problems of two major investment banks.

"It is important to note that the state of Rhode Island currently does not have any exposure to Lehman, Merrill Lynch or Bear Sterns at this time," Caprio said in a statement this morning.

Lehman Brothers filed for bankruptcy this morning, while a struggling Merrill Lynch and Co. was bought by Bank of America. Bear Sterns collapsed six months ago.

In an interview today, Caprio said the state's pension fund does not directly own stock in Lehman Brothers or Merrill Lynch. While saying the state has "minimal exposure" through index funds that invest in the 500 largest companies in the United States, he downplayed that, calling it "immaterial."

Municipalities that use the investment banks as underwriters could face other problems, according to Caprio.

He said, "The issue that is of concern for most states, cities, towns and counties is that these investment banks have guaranteed interest rates on borrowing that many states, cities, towns and counties have." The state of Rhode Island not "entered into transactions like that."

In early March 2007, through a competitive bid process, Caprio said he expanded the qualified pool of investment banks to underwrite the state's bond transactions.

Merrill Lynch, along with Goldman Sachs and Morgan Stanley, is among the investment banks that the state uses, Caprio said. He said his office expects to continue its review and expand its pool of banks.

 Tags  business stock market

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