“Up In Smoke” is a term Municipalities are using to describe the taxpayer money invested in Lehman Brothers.

More than 75 states, counties, cities and special districts  are asking the federal government to replace at least part of the more than $2.2 billion they lost when the Lehman Brothers investment bank went belly up last fall.

“It was an A-rated investment one day, and the next day it was gone,” said Roger Carroll, Loomis’ treasurer and finance director.

“I remember when I heard the news, I said, ‘No, you’ve got it wrong,’ ” said Robert Adams. Adams is the chief financial officer for the California Excess Insurance Authority, who provides insurance to county governments. The Authority lost $10 million.

Many economists agree that the collapse of Lehman was the beginning of the worldwide panic that sent stock markets plummeting, causing credit to freeze up and then sending the global economy into a tailspin.

Was it a mistake to allow this company, who had invested its money by originating mortgages, purchasing mortgages, and packaging mortgages into securities and then marketing those securities to other investors?

Lehman itself made investments in non-prime residential mortgages, but one of its subsidiaries, Aurora Loan Services, specialized in loans for the full value of property (100% financing) to people with low credit scores (Sub-Prime). The company also aggressively invested in high-risk commercial properties.