When a trusted Merrill Lynch adviser proposed putting $20 million of Maine’s cash pool into a securities firm called Mainsail II last August, it sounded like a good deal. A triple A rating. Interest at an annual rate of 5.45 percent. But 12 days later, the investment was frozen and valued as junk, a victim of the subprime mortgage crisis. This raises questions of whether Maine and its investment advisers are putting too much stock in ratings rather than the portfolios of the funds invested in and whether the state relies too heavily on advisers and brokers.

Merrill Lynch’s adviser was correct about those initial AAA ratings and in stating that Mainsail II was registered in Delaware. But Maine State Treasurer David G. Lamoine says he was not informed that Mainsail II was headquartered in the Cayman Islands and that it was a “structured investment vehicle” deeply into subprime mortgages. Either bit of information would have raised a warning flag.

Mr. Lamoine says he believes Maine will get all of its money back with interest – eventually, and “perhaps in more than one step.” He and the Attorney General’s Office and the Office of Securities are investigating on two tracks: first, whether as Mainsail II winds down, it may be able to pay back Maine in full, and second, whether someone else may be liable. That could mean a possible lawsuit against Merrill Lynch or against MBIA, a big insurance firm under contract as Maine’s financial advisor.

A timeline shows how bad was the advice and how risky was the investment:

February-March, 2007: The subprime mortgage industry was already collapsing with the bursting of the housing bubble. Twenty-five subprime lenders were already belly-up or close to it.

April 2: New Century Financial, the largest U.S. subprime lender, filed for chapter 11 bankruptcy protection.

Mid-June: Two huge Bear Stearns hedge funds collapsed because of bad bets on the mortgage market. Others followed in July and August.

Aug. 6. American Home Mortgage, a large real estate investment trust, filed for chapter 11 bankruptcy protection.

Aug. 8. Maine invested its $20 million in Mainsail II’s commercial paper.

Just as Maine officials were investigating the matter, the city of Springfield, Mass., managed to get Merrill Lynch to make a full refund of its $13.9 million investment in similar Cayman Islands securities. That may give some hope that Merrill Lynch could do the same for Maine, although Springfield’s investment was made without its authorization.

Who is to blame for this fiasco? Some Republican lawmakers blame Mr. Lamoine. But he was in good company. Other state and municipal treasurers made the same bad bet, several with the same Mainsail II. And Maine’s treasurer, who is not an investment specialist, was relying on advice from a supposedly reliable adviser and on the three principal rating firms, whose AAA ratings have since been shown to have been entirely unjustified.

Maine should get its money back, with interest and an apology. But it must re-examine this situation and take steps not to repeat it.