New Jersey Pays Goldman Sachs for Bonds that Don't Exist

Remember when this used to be called illegal? Sorry, not illegal, just retarded (quote WCV)


New Jersey taxpayers are sending almost $1 million a month to a partnership run by Goldman Sachs Group Inc. for protection against rising interest costs on bonds that the state redeemed more than a year ago.

The most-densely populated U.S. state is making the payments under an agreement made during the administration of former Governor James E. McGreevey in 2003, when New Jersey’s Transportation Trust Fund Authority sold $345 million in auction-rate bonds whose yields fluctuated with short-term interest costs. The agency finances road and rail projects.

“This vividly shows the risk of entering into interest- rate swap agreements,” said Christopher Taylor, former executive director of the Municipal Securities Rulemaking Board in Alexandria, Virginia. “The world’s got to see what stupidity even the sophisticated investors like the transportation fund can get into.”

While New Jersey replaced the debt with fixed-rate securities in 2008 after the $330 billion auction-rate bond market froze, the swap -- in which two parties typically exchange fixed payments for ones based on floating interest rates -- isn’t scheduled to expire until 2019.

The state paid $940,000 under the agreement last month and a total of $11.4 million since the auction-rate bonds were redeemed. The expenditures come as the fund reaches its borrowing limit and Governor Jon Corzine, Goldman’s former chairman who was a U.S. senator when the contract was signed, seeks $400 million in budget reductions as tax receipts fall.

The funniest part is the following:

John McCormac, the Mayor of Woodbridge, N.J., state treasurer at the time of the 2003 deal, declined to discuss the issue in a telephone conversation today. “I have no recollection of anything,” he said. “Ask the treasurer.”

I'm sure Goldman has no idea what you are talking about either. And actually I take that back, McCormac's thoughts aren't the funniest part, the funniest part is that an ex Goldman chairman pimped out his own state as financial slave to the Goldman parasite.


I'm partial to this assessment of Corzine myself

It’s a bit of a stretch for the Corzine campaign to believe that some of Barack Obama’s snake oil charm can rub off on the doomed Governor, but the Corzine campaign has previous experience in making a little bit sound like a whole lot. The Governor afterall, has a charm deficit that is bigger than his budget deficit.

Last week, the Corzine team came under fire for asking state employees to fake the reality of unemployment in New Jersey which have surged to all time highs under Mr. Corzine, the multi-millionare from Illinois who was once forced out of Wall Street banking firm Goldman Sachs, but not before bagging $400 million in the company’s IPO.

Can't get swap protection on a charm deficit, homeslice, try again. Oh and who gives a shit, it's New Jersey we're talking about here. Pffft.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.


wcv said...

I think this is more an indication of a retarded state Treasurer than anything sinister or illegal.

There's nothing wrong with putting on an interest rate swap to hedge your bonds, but when you redeem the bonds, you close out the hedge.

Leaving the hedge running after the bonds are gone is either gross incompetence or a gambling addiction.

i'll take what's behind door #1, Monty, "Retarded" it is. Thanks, WCV :)