Yukon's $36.5M frozen investment is safe: Fentie

Yukon Premier Dennis Fentie says he's confident his government's $36.5-million investment in the global credit market remains secure, even though that money is frozen in what one economist called a "bet that turned out poorly."

The territorial government, along with hundreds of other investors who poured billions of dollars into the global credit market, have been in limbo since the market was frozen in mid-August.

Canadian corporate lenders say it will take at least another month for the problem to be fixed. While opposition politicians decried what they said was a risky use of taxpayers' money, Fentie said there's no reason to panic.

"The unforeseen circumstance that developed has put many in this position, many governments including ourself," Fentie said Tuesday.

"I got to tell you, I'm not all that concerned about it because we are working closely with the institutions related to this matter. So this is not a loss of money. This is merely an extension of the maturity date."

In the notes to the Yukon's public accounts documents, which were tabled in the legislative assembly this week, finance officials said they don't know the status of the $36.5 million invested this summer on a 30-day note known as an asset-backed commercial paper. Such investments pay higher interest than safer government bonds or other investments.

'Your government took a bet,' economist says

In August, just before the Yukon's investment was due to be cashed in, the government and other investors were told that their money was not going to be repaid on time. Finance officials say they expect to learn by mid-December what options they have to recoup the investment.

But David Andolfatto, an economics professor at Simon Fraser University, told CBC News that it could take years before the Yukon government finds out how much it will be able to recoup and there's no guarantee on how much it will get back.

"Your government took a bet, and the bet turned out poorly," Andolfatto said Tuesday in an interview.

He said that if the government or any other investors want their money back, they will have to find someone willing to buy their securities.

"Holders of the securities, like your government, don't want to sell these assets for a low price, and there's a bunch of buyers [that] don't want to pay a high price for these securities," he said.

"So I think that it's going to take quite a long time before the mess is all sorted out."

Andolfatto said that while other investors, such as mining companies and stock brokers, are all caught up in the credit market freeze-up, most governments kept their money in safer places.

"This is the first example I have ever heard of a government getting involved," he said.

"They kind of got suckered in a little bit by the high yield without taking into account that, you know, this is a risky investment."

Past investments paid off big

"The finance minister took a risk with taxpayers' money and now we may be out $36 million," Liberal Opposition Leader Arthur Mitchell said during question period Tuesday.

Fentie insisted that not only is the current investment safe, but his government's other investments over the years have been paying big dividends.

Nearly $7 million was earned by investing last year, and almost $4 million was gainedtwo years ago, he said. That has contributed to the territory's healthy bank account, which boasts a $269-million surplus.

"So instead of a few hundred thousand dollars of earnings, we're now in the millions," Fentie said.

"Year to date, approximately $5 million more in investment earnings. And the Yukon government today also has approximately $200 million of cash."

Andolfatto suggested the Yukon government could have used its surplus to give Yukoners a tax cut, rather than pour the money into high-risk investments.

"They're basically using taxpayer money to invest," he said. "Aren't Yukon taxpayers capable of rolling their own dice?"