La Times:
But one of the main buyers of the complex toxic securities issued by the Goldman vehicle, a German bank known as IKB, paid for its share of the deal with money it collected from a number of relatively unsophisticated investors including King County in Washington state.
In 2007, the county bought $100 million of commercial paper, a type of short-term debt, from Rhineland, a special fund created by IKB that in turn snapped up nearly $150 million of the securities created by the
Goldman vehicle known as Abacus 2007-AC1.
When the huge financial apparatus devised by Goldman went down in flames, taking Rhineland with it, King County was saved from a loss only because IKB had agreed to insure Rhineland's debt.
But the local government wasn't so lucky with a similar, $50-million purchase it also made in 2007 from another IKB fund, dubbed Rhinebridge.
The county lost $19 million when Rhinebridge collapsed — and an additional $54 million when other similar funds defaulted. About 100 county agencies in the Seattle area, including some that deal with libraries and schools, saw their budgets cut as a result. The county has sued IKB and the rating firms that put their stamps of approval on Rhinebridge.
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