The Californian State Treasury could spend up to $12 billion on commercial asset-backed securities next year, following the signing last week by Gov. Gray Davis of a bill seeks to modernize the state's investing practices.

The bill, dubbed the "electronic bidding bill", will modernize not only the technology involved in California's investment process, but "[will bring] the competitive bidding process up to date and in line with current industry practices," said State Treasurer Philip Angelides. This will allow the state to invest in higher yielding bonds, such as commercial and commercial asset-backed paper.

Though unable to offer specific target sectors, representatives at the state treasury office said that California looks to buy paper from "multiple sellers" and "different businesses with different loans."

"We currently have a restriction that's been legislated," said Christine Drevalas, treasury program manager of the state treasury office's investment division. "We can hold 30% of our total portfolio holdings in commercial paper." The total portfolio, Drevalas explained, is more than $35 billion, and she estimated that anywhere between 10% and 20% percent of it will be dedicated toward commercial asset-backed securities in the year 2000.

"Each individual issuer has to be approved for purchase," said the Drevalas, explaining that the Pooled Money Investment Board - consisting of the treasurer, the controller and the head of the department of finance - must review each transaction in the preliminary stages.

"Generally we approve between three and ten commercial paper issuers a year," she said. Currently, the state has roughly $8.8 billion, or 25% of its investment portfolio, held in corporate commercial paper.

The bill was sponsored by Assemblyman Dean Florez.

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