Florida state of mind could set tone for U.S.

Across Florida, home construction has slowed. Unemployment is rising. Residents are screaming about gas prices, medical costs and property tax bills. State tax receipts show consumers buying fewer cars and businesses investing less. Retailers fear a weak holiday shopping season.

Leading economists say the Tampa economy is one of the likeliest in the nation to slip into decline in 2008, and they give Florida—along with California, Arizona, Nevada and several other states socked hardest by America's mortgage woes—a 50 percent chance of falling into recession, perhaps bringing the nation with them.

Historically, weaker economies hurt the party holding the White House—Republicans in this case, said Steven Cochrane, senior managing director of Moody's Economy.com. But partisans on both sides claim a recession-draped election would favor their nominee in 2008.

A bellwether metro area

Political scientists say Tampa is a bellwether metro area in perhaps the most bellwether of big states. Its struggles support predictions that economic uncertainty will roar from back-burner to issue No. 1 in 2008, both nationwide and in the fight for Florida's 27 up-for-grabs electoral votes.

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Indictments Due in Loan Fraud Scheme

Federal prosecutors in Miami-Dade County were set to unseal an indictment Monday naming 31 defendants in a multimillion-dollar home loan fraud. The indictments come as law enforcement continues to try to rein in mortgage fraud, which has run rampant throughout Florida. Earlier this year, Fannie Mae said the state led the nation in mortgage fraud, with the highest rate in South Florida. In September, U.S. Attorney R. Alexander Acosta announced a federal-state mortgage fraud initiative to target those who commit mortgage fraud, which often includes everyone from appraisers and mortgage brokers to loan officers. Federal prosecutors also charged 18 with mortgage fraud that month.

State funds have $1.5B in troubled mortgage-backed investments

As Florida tries to restore calm to the state's investments for local governments, the same troubled securities lurk in the state's own funds, particularly those used to pay hurricane claims.

A review of public records show both Citizens Property Insurance and the Florida Hurricane Catastrophe Fund have another $1.5 billion in troubled mortgage-backed investments managed for them by the state, under names like Countrywide and Citigroup.

Cat Fund Director Jack Nicholson said he is reassured those hapless holdings will be gone by the time Florida is back in hurricane season next May and has a potential need for quick cash.

Meanwhile, Citizens is taking a beating from lawmakers for allowing so much — $1.5 billion to become trapped in the state-managed investment pool that had to be shut down last month.

Citizens, which insures 1.3 million Florida homes, did not participate in the mass withdrawals last month that closed Florida's Local Government Investment Pool.

The result is that Citizens shares the fate of hundreds of local government entities that cannot make further withdrawals without paying penalties.

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The SBA reports 11 percent of those other state-managed holdings for Citizens include securities downgraded or in default. The insurer had not, by Friday, released a similar account of another $4 billion that is privately managed.

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And the overseer of the state's retirement pool — Department of Management Services Secretary Linda South — has asked the SBA for a similar accounting of the risk to Florida's $138 billion pension fund.

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Friday saw another $44.8 million in withdrawals from the capped local government investment pool, and deposits at $21 million — leaving just more than $10 billion by close of Friday. Because of withdrawal limits, the balance is unlikely to go much lower.