A Review of the State Treasury's Management of TexPool
Report #: 96-053
Overall Conclusions
Due to corrective action by the Texas Legislature, TexPool is now required to observe stringent safety requirements. TexPool currently maintains a AAAm rating by Standard & Poor's Managed Funds Group.
These additional requirements were necessary because, in the past, TexPool was not operated safely. Questionable management decisions by TexPool administrators contributed to TexPool's liquidity crisis, which ultimately cost the State at least $97 million.
Key Facts And Findings
From April until December of 1994, TexPool operated outside safety margins established for regulated money market funds. By failing to take action to stabilize the net asset value of TexPool while simultaneously allowing participants to withdraw their original investments in full, TexPool administrators took inappropriate risks for a fund premised upon principles of safety and liquidity.
The Attorney General has determined that the Treasury's use of state funds to purchase TexPool's securities for a price above market value was not authorized by law.