We were lucky to get rid of Corzine.

[Joanne98]

This is a scandal that hasn't hit yet. It looks like the ex-CEO of Goldman Sachs was running money from the state treasury to GS for doing NOTHING! Goldman is a curse!



Goldman Sachs Still Paid for Swaps on Redeemed Bonds (Update2)

Oct. 23 (Bloomberg) -- 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.

Bond’s Life

“The state has made it clear that true interest costs are measured over the life of bonds,” the New Jersey Treasurer’s office said in an e-mailed statement from spokesman Tom Vincz. “As this swap is applied as it was intended to be applied, with TTFA variable-rate bonds, true interests costs are projected to be below the average true interest costs for TTFA bonds,” the statement said, referring to the Transportation Trust Fund Authority by its acronym.

“Unfortunately, Bloomberg misleadingly measured these costs over a brief window in time, which captured only the influences of the worst credit conditions in U.S. history.”

Harvard Swaps

Municipalities and universities across the U.S. have paid hundreds of millions to terminate swaps on variable-rate debt after interest costs, instead of climbing, fell to record lows in the worst credit crisis since the Great Depression. Harvard University last week disclosed it had given $497.6 million to investment banks to exit such agreements following similar terminations by New York’s Metropolitan Transportation Authority and the Oakland, California-based Bay Area Toll Authority.

In New Jersey, the 3.6 percent fixed rate the trust fund is paying on the swap has pushed the cost to taxpayers of the original $345 million borrowing to 7.8 percent, the most the authority has paid since it was formed in 1985, according to records posted on its Web site.

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.”

Corzine spokesman Robert Corrales referred an inquiry today to the treasurer’s office for comment, and Goldman Sachs spokesman Michael DuVally referred to an earlier statement in which the bank said it is working with the state.

Inheriting Swaps

“This administration inherited a large swap portfolio and has worked over the last several years to terminate, reverse and prudently manage the derivatives to the benefit of the taxpayer,” the treasurer’s statement said. “This administration has initiated only two new swaps, which have been used to reverse pre-existing swaps and protect taxpayers from potential financial risks.”

Payments on the swaps without underlying variable-rate bonds are draining money from a dwindling account that may not be able to support new projects because the $895 million in annual gasoline taxes and toll revenue dedicated to the transportation trust fund will be needed to pay debt service on $10.3 billion in debt. To help prop up spending, officials have suggested raising New Jersey’s 14.5 cents-a-gallon gasoline levy, the fourth- lowest among U.S. states, according to research by the Tax Foundation, a Washington, D.C.-based research organization.

Pulaski Skyway

New Jersey’s contract with Goldman Sachs Mitsui Marine Derivative Products L.P., a partnership of the bank and Japan’s Mitsui Sumitomo Insurance Group Holdings Inc., allows the state to terminate the deal without penalty after 2011. Canceling before then would require a payment estimated at $37.6 million on Sept. 30, according to state records.

The state’s payments on the swap in the past year have exceeded the $10 million budgeted to maintain the 76-year-old Pulaski Skyway, the 3-mile (4.8 kilometers) elevated road from Newark to Jersey City.

“I’m sure there’s an explanation,” Corzine, 62, said during a brief interview as he left a contractors’ convention in New Brunswick, New Jersey, on Oct. 14. “They don’t just send money out.”

Continued>>>
http://www.bloomberg.com/apps/news?pid=20601087&sid=aL8bFa17XvlM#

The only thing I don't understand is why the GOP didn't use this against him. The story broke in October.

I wonder why he was forced out of GS.

As CEO, Jon Corzine engineered the transformation of Goldman Sachs from a private partnership to a public company. The initial public offering (IPO) of Goldman stock created a huge windfall for the partners, including Corzine. Indeed, Jon Corzine's current personal wealth is estimated in the range of $600 million.

However, Corzine was not universally popular as CEO, and was forced out in 1999. Then he turned his attention to politics. He had been a supporter of the Democratic Party, and had chaired a commission on capital budgeting in the federal government in 1997, under President Bill Clinton.

http://financecareers.about.com/od/whyfinancialservices/a/corzine.htm



I know Corzine's probably going to say it's such a small amount that nobody noticed it and that may be true but when you're talking about raising property taxes during a recession it doesn't go down well. It just reminds people of how much money GS has made during our hard times. It's infuriating!

[Fuzz]

1. You are about to be slammed, at least I was. Maybe not though, the election is over.

Just questioning a democrat like Corzine here was enough to be accused of wanting an asshole like Christie to win.

I'm a NJ resident, but not a Corzine fan although I did vote for him.

[Joanne98]

3. I posted this when it first broke and nobody noticed. It's a big deal.

Even if Corzine is innocent nobody's going to believe it. I wouldn't be surprised if he goes to jail. I don't want this shit to hurt our party. If we have to clean it out ourselves so be it!

[Sebastian Doyle]

2. It's time to put every single employee (and ex employee) of Goddamn Sucks behind bars.

They are treasonous piece of shit who are destroying this country, and that is not an exaggeration.

[Joanne98]

4. Not every single employee just the ones in politics!

This whole GS mess is going to blow up in our faces. Fuck the banksters. All of them. And don't forget JP Morgan Chase. They're just as bad.

[Sebastian Doyle]

7. Yeah, Chase sucks too.

Thank God I closed out my Washington Mutual accounts before those idiots took over.

[Demoiselle]

5. Wow. I figured Corzine's history with Goldman would work against him

in this election at this time even without any specific charges of wrongdoing... and I didn't know anything about this particular story. (I know, I should pay closer attention.)
I have to agree that Goldman Sachs needs to be dealt in a very big way. I wish I knew exactly how we reassert control over Wall Street.
Scary.

[iceman66]

6. but not luck to get Christie instead!!!

Corzine should have done the honorable thing and stepped aside so a more electable Democrat could have run.

It's not like he needs the job!

[Fuzz]

8. That's what I wanted a long time ago. I never liked the way he was buying

his political offices here in NJ from the beginning. He would meet people on the street and say "Did you see me on tv?" because of all the ads he was running.

NJ is too corrupt for shit like that. We need a true progressive to come in here and get rid of the cronies and crap and clean it up.

[AllentownJake]

9. This was McGreevey's fault

and it is the Treasurer's job to keep up with the fiances on a detail level day to day month to month. Not the Governor.