The Associated Press reports that local Florida governments have been withdrawing assets from its state pension fund at an astonishingly rapid clip. Specifically, in the last two weeks local Florida governments have withdrawn 40% -- or nearly $10 billion -- from the state pension pool. At this rate, the fund would have been 100% depleted by the end of 2007. So The State Board of Administration held an emergency meeting to halt further withdrawals.

If you think about this for a minute, you'll realize that this is pretty much the same thing that happened during the Great Depression when people withdrew their money from banks because they were afraid of losing their savings. In response, the government declared bank holidays. That is, the government told them that they could not get their hands on their money.

What -- you might ask -- is the reason that Florida local governments were so eager to get their hands on that pension money? Florida invested in some mortgage-backed securities (MBSs) -- which were downgraded by credit rating agencies to the point where they were below the standards permitted for a pension fund. Specifically, $700 million in asset-backed commercial paper was downgraded below "purchase credit rating guidelines."

What does this mean to you?

If you have a defined benefit pension plan -- such as the ones for Florida government employees -- there's a good chance that it has invested in similar asset-backed securities. And these pension funds have strict guidelines which prohibit them from holding these securities if ratings are cut to below a certain level.

I think it makes sense to check with your pension fund administrator to find out whether your pension is exposed to these securities and if so, how vulnerable your pension might be to a loss in value of these assets. Florida is certainly not alone -- according to Thomson Financial there are estimates that pension funds will take a $1 trillion hit from the devalued MBSs and Collateralized Debt Obligations (CDOs) because they must sell securities immediately and take a loss when they are downgraded.

It seems that every week, a new wrinkle quietly pops up in the way that our flawed system of issuing mortgages is damaging the financial well being of people around the world. I would be very surprised if Florida's problems were not widespread in states across the country.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter.