Crane, Silver face off in debate over Idaho investments

BOISE – Idaho state Treasurer Ron Crane’s Democratic challenger, Twin Falls CPA Deborah Silver, went on the attack in a televised debate between the two on Thursday night, charging that Crane should be fired as state treasurer for a fund transfer that auditors say cost state taxpayers at least $10 million. “In the business world, we know how this would end – the treasurer would be fired,” Silver declared. “The only way to fire this treasurer is with your vote. I am running to give Idaho taxpayers a choice for honest stewardship of their tax dollars.” Crane protested that his office “vociferously disagreed with the findings of the legislative auditors,” and defended his actions in the transfer, which occurred after he said mortgage-backed securities the state had purchased in 2005, 2006 and 2007 were showing $70 million in losses as the housing market collapsed. “I held those securities and rode out the storm, letting them come back in value toward par,” Crane said. “Last year, 2013, I had enough interest earnings and portfolio gains to wash out five of the seven securities and still show a profit of $122,000 for the general fund and $2 million for all the rest of the portfolios that I manage. I still have two of those securities in my portfolio. A year ago at this time, they were about $17.5 million underwater. Today, as of Friday, they are $9.6 million underwater. So they’re coming back, they’re moving in the right direction.” Crane charged that legislative auditors wanted him to sell the securities at the time and realize the full $70 million in losses. But a critical state audit report didn’t suggest that; instead, it faulted him for transferring the securities from a local government investment pool to the investment fund for state money, shifting the losses to state taxpayers rather than local governments. Crane transferred cash for the full face value of the securities from the state fund to the local government fund, while moving the securities to the state fund. That shifted the full loss to the state fund, though the two funds had been commingled to make the investment in the first place. Auditors said the state later lost $10.2 million when it sold some of the securities, and still could lose more. State auditors called the transfer “inappropriate.” It came after two ratings agencies threatened to downgrade the credit rating for the local government pool because it contained the risky securities; the state fund, as an internal investment fund, doesn’t have a rating. The audit cited an email from Crane at the time in which he said, “I do think that our rating with S&P is more important than any investment vehicle we are using.” Silver said, “The auditors do not tell you when to sell. The auditors suggested that you weren’t within policy.” She said, “We did have some very sad underwater investments.” She noted that King County in Washington had similar investments; it broke them out into an “impaired holdings” account “so the public could see where they were.” Crane noted that state auditors suggested more oversight of investments made by his office. “I embraced that,” he said. “We went to the Legislature, got the legislation passed, and we do have an oversight committee that is being appointed by the governor as we speak. So I’m excited about the future. I think there’s good days ahead.” Silver said, “We haven’t needed an investment board before we had this treasurer.” Crane, a Republican, former state lawmaker and owner of an alarm company, has been Idaho’s state treasurer for the past 16 years; he is seeking a fifth term. This is Silver’s first run for public office.