CHICAGO -- McDonald & Co. Securities Inc. will help Ohio governments that invested in risky securities analyze their investment portfolios and sell the securities, the Cleveland-based firm announced Tuesday.
Richard Clark, McDonald's spokesman, said the firm is offering the program as a community service to local governments that are experiencing losses from investments in interest-only stripped mortgage-backed securities.
"We've done business with most municipalities in this state and we have some expertise to offer," Clark said.
On Tuesday, Ohio Auditor Thomas E. Ferguson released a list of 18 counties, cities, villages, and school districts that face potential losses of $8 million uncovered in ongoing audits conducted by his office. Ferguson said the local governments placed public money in "illegal, high-risk investments," such as the interest-only mortgage securities.
He also said that audits scheduled to begin next year will probably uncover additional governments facing losses from similar investments.
McDonald plans to provide "a confidential, no-charge analysis" of governments' portfolios. In addition, the firm said it will try to provide governments with "the best bid for any interest-only securities" they want to sell.
Clark said that McDonald will draw on its experience in trading in the mortgage-backed and collateralized mortgage obligation markets to help the governments sell their securities. He said the firm may be able to pool the governments' securities and trade them.
McDonald is already advising Portage County, which is facing the biggest potential investment losses, according to the auditor's office. Ferguson reported Tuesday that Portage could lose from $1.5 million to $5 million.
Clark said he is unaware of any other securities firm offering this service to the Ohio governments. He said McDonald has not sold to governments any of the investments being questioned by the state auditor.
In addition, the firm announced an alliance with two other Ohio firms, United American Capital Corp. and Chase Global Securities Inc., to provide a one-stop investment service for governments.
The service, called Government Plus, will deal with "all aspects of public funds financial management" and will "seek to insure compliance with state investment laws and promote prudent investment decisions," according to a press release from McDonald.
