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Corzine should run . . . for the hills
Corzine should run . . . for the hills
November 16, 2008 Paul Mulshine / Star Ledger
I'm not a gambling man, but I make exceptions for politics. I mull things over for a while and at a certain point I come to a conclusion on which I am willing to bet a six-pack of beer.
And I am now willing to bet a six-pack that Jon Corzine will not run for re-election as governor of New Jersey. Unlike me, our governor is a gambling man, a damn good one. He made a fortune in the gaming houses of Lower Manhattan. And he knows enough to quit when he's ahead.
The deck is stacked against the next governor. And Corzine helped stack it even before he got into politics. That was back in the go-go 1990s when he led the charge to have Goldman-Sachs go public. His firm was far from the first to do so, but that trend led directly to the current debacle on Wall Street, according to an article in the latest issue of Conde Nast Portfolio that has become required reading in financial circles. The article by Michael Lewis is headlined simply "The End." And at the end of it, after Lewis has spun a tale of greed and incompetence stretching back 20 years, he interviews the head of one of the first investment banks to go public.
"He agreed that the main effect of turning a partnership into a corporation was to transfer the financial risk to the shareholders," Lewis writes. "When things go wrong, it's their problem," he quotes the former exec as saying. "It's laissez-faire until you're in deep (S-word)."
Which is what we're in now. Wall Street is shedding jobs like a golden retriever shakes off water. Those jobs were the engine of the New Jersey economy. Sales tax and income tax revenues are expected to drop by more than a billion dollars next year.
That's bad enough. But the killer is what happened to the state pension fund. It lost 10 percent of its value in September, and indications are it may have lost even more in October, though that hasn't been reported yet.
To put that in perspective, consider that Corzine had to scrimp and save just to put a mere $1.1 billion into the fund this year. Next year he would have to put in perhaps $15 billion, almost half the budget, just to get us back to where we started this year.
And the fund was on shaky ground even then. That's why Corzine wanted to "securitize" the toll roads back before "securitize" became another S-word.
Things may have been bad then, but now the fund is like that lady in the "I've fallen and I can't get up" commercial. Its liabilities are growing so much faster than its assets that the two lines must converge.
There's one obvious solution, suggested to me by another Wall Street whiz. All we'd have to do is fire 25 percent of the employees covered by the fund. Simple. But the fund doesn't cover just state employees, a quarter of whom probably could be cut. It covers teachers, cops and firemen all over the state. Corzine couldn't cut them if he wanted to.
So that's out. And Corzine KO'd the other possible solution back when he first took office. In 2006, Corzine was advised by many people, including some of his fellow Democrats, that the only way to save the pension system was to end it. All current public employees would get their pensions, but new hires would have to rely on defined-contribution plans similar to the 401(k) plans held by us people who pay their salaries.
The unions went crazy. And since public employee unions are the prime motive force in Democratic Party politics, an upwardly mobile Democrat like Corzine had to assure them that he takes the side of labor against management - even though he is management. Thus we got the bizarre spectacle of Corzine taking the microphone at a union rally in Trenton to proclaim, "We will fight for a fair contract!"
He's still fighting, but he's not helping the public employees. Corzine could have been a hero if he'd straightened out the system when he had the chance. But now it's too late. The ship is sinking, and I think the captain's going to desert. There are rumors that he's being considered for the job of treasury secretary in an Obama administration. But if that falls through, "I think he'd take the job of ambassador to Zimbabwe," one Wall Street wag told me.
I imagine he could work his way a bit further up the alphabet. But wherever he went, it would have to be better than spending another $50 million or so from his dwindling fortune to win re-election to what could be the most thankless job in American politics.
That's what the smart money says anyway. Or the smart beer.
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