State Will Invest Millions to Boost California Economy

State Treasurer Kathleen Brown on Wednesday unveiled a plan to stimulate the state’s flagging economy by investing as much as $700 million in California’s small businesses, housing and agriculture.

Saying her goal was to help “reinvent the California dream” by making more money available in these tight-credit times, Brown told participants at an economic development conference in the Concord Hilton that the money will come from the state’s $21-billion short-term investment portfolio.

Those funds, which represent tax proceeds, surplus highway funds and money from state agencies, are now invested in certificates of deposit, Treasury bills and other securities.

“We’re making a commitment to California . . . by putting California money to work,” Brown said of the new investment program, dubbed Cal-Vest.

Steven G. Zimmermann, a San Francisco-based senior vice president with the Standard & Poor’s credit-rating firm, said the new investment strategy will have no bearing on the agency’s recent decision to downgrade California’s bond rating, but that “anything done to stimulate the economy is probably a good idea.”

As much as $400 million will go to buy existing home mortgages on California properties in the secondary market. Those will be guaranteed by the Federal National Mortgage Assn., or Fannie Mae. The idea, Brown said, is to free up money that banks can then lend to other California home buyers. (Last week, the California Public Employees Retirement System announced that it would invest $225 million in the development of single-family residences nationwide.)