New Jersey Governor Chris Christie has learned that talking about state insolvency may have a cost.
About 20 minutes after Christie, 48, told a town-hall meeting in Paramus today that health-care costs “will bankrupt” the state, the New Jersey Economic Development Authority cut its tax-exempt school-related bond offering by more than half to $712.3 million.
“It doesn’t help to try and sell a $1 billion deal on the same day the governor is talking about the state going bankrupt due to health-care costs,” said Mike Pietronico, who oversees $360 million as chief executive officer of Miller Tabak Asset Management in New York.
I’m sure everyone will be making a big deal out of this for the usual partisan reasons, and hey, why not. If the roles were reversed, the Republicans would (and have) done the same thing.
But a more important thing to me is that it really, really bothers me that our Galtian overlords on Wall Street can’t simply base their financial decisions on empirical evidence, but instead jump like my cat when I turn on the vacuum when someone employs some pretty boilerplate political rhetoric.
pragmatism
he’s the rex ryan of governors.
BGinCHI
Someone remind me what the difference is between Wall St and a casino?
MattR
@BGinCHI: Casinos pay taxes?
(FYWP. Should have remembered that was a magic word)
daveNYC
Casino winnings are taxed more.
Blackfrancis
First comment, right out of the box.
freelancer
M’sOTU are pants-wetting, mindless grifters.
Allan
Loose lips sink ships.
BGinCHI
Weird.
There was a DougJ post with a crow and a cat video narrated by Alan Thicke. Then it was gone.
I think I might be having a nervous breakdown.
WereBear
It would be different if the Market were anything more than a bunch of grifters looking for the long odds… but it isn’t.
JAHILL10
You think before his term is up Christie will realize that there might be some actual thinking involved in this governating business?
General Stuck
All they need is an excuse to jump, into the nearest pile of money, and away from responsibility.
scav
@BGinCHI: That’s ok, I hallucinated an open thread.
Zifnab
Assuming New Jersey did go belly up tomorrow due to massive red ink from health care costs, does it qualify as Too Big To Fail? Or is that a title reserved for the private sector?
mr. whipple
That’s assuming he didn’t want to say what he did. The republican governors nationwide are all spewing the same shit: public employees are bleeding their states dry. It’s union busting, plain and simple. Divide and conquer.
In a recession, what they are doing might have resonance with voters. We’ll see.
BGinCHI
@scav: The scariest part is that I knew it was Alan Thicke.
JAHILL10
@Zifnab: You might be able to make that argument for the governor, but New Jersey itself is a pretty small state…
D0n Camillo
@BGinCHI:
Casinos are regulated?
scav
@BGinCHI: I can’t help you there. Good Luck.
El Cid
The stock market is like this all the time.
Joseph Nobles
OT: Glenny informed us today that every time we eat bacon for breakfast, Edward Bernays thinks we’re stupid and Cass Sunstein gets another check from George Soros. Or something like that. I was too busy rolling around on the floor laughing to be sure.
Mike Kay
the stock market shouldn’t retreat, they should reload.
Chyron HR
@BGinCHI:
A casino gives you free drinks while it screws you over.
scav
@Joseph Nobles: huh? I thought we ate babies for breakfast or has the blood libel changed again? DoG it is so hard to keep a LibKosher kitchen!
Mike Kay
meanwhile, Giuliani is yelling at Christie for taking a powder during the mother nature’s Christmas Bombing of Jersey.
Violet
Meh. Markets are emotional. Because they’re run by people who panic and then sell, buy, whatever. Nothing different to see here.
Paris
Treasury Secretary Timothy Geithner, who effectively oversaw Citigroup as the then-president of the Federal Reserve Bank of New York, told SIGTARP during an interview last month that it’s not possible to create effective, objective criteria for evaluating the risk a financial firm poses to the system.
Really? Then why don’t you find a job you’re competent at?
Pooh
How long has it been since the “financial markets” were concerned with this “empirical evidence” (har har to that concept as a whole) of which you speak?
There’s a larger point to be made here about living/governing in a completely post-industrial/post-modern world in which so few people, especially amongst the ruling and/or chattering classes have so little experience with things that tangibly exist that the whole concept of empirical truth is so far outside their realm of experience that they don’t even think to consult it before moving onto analysis of the third and fourth level of meta-concerns.
Paris
Also, just curious, what does Christie’s age have to do with anything in the story?
HyperIon
Cole wrote:
Now there’s a convincing argument (for an 8-year-old).
pragmatism
@BGinCHI: all players can get free drinks in a casino.
Calouste
The reaction might have been different if the comment was made by a governor who isn’t a member of a party where more than a few of the elected representatives seems to have no problems with defaulting on the debt.
Pooh
or, more succinctly we used to build shit…
Lolis
These Galtian overlords don’t seem to understand how controlling the WH and Senate works. Some rich guys have been complaining to Ezra Klein about the “uncertainty” around whether health care reform will be repealed. Can we send these geniuses back to high school government class?
Martin
Well, base asset pricing *is* based on empirical evidence, but the decision whether to buy or sell at that price is based on future trends, for which there is little empirical evidence you can rely on. At that point, statements about future solvency are extremely relevant. Why buy NJs bonds when I could instead today buy ILs, who just raised income taxes and appear to be putting their economic needs ahead of making political hay?
Pooh
@Martin: How do you plug that into your proprietary trading software?
Comrade Mary
Video (or official seismograph readings) or it didn’t happen.
Martin
@Paris: Did you even read the article? He was basically arguing that any model you would come up with, the banks would find a way to mask the risk they pose. And he’s right.
The only solution to the problem is to make the banks so small that they simply can’t overwhelm the economy should they fail.
But that’s not his job.
The Populist
@Martin:
I would agree with this PLUS think about it…which party would be likely to ALLOW a state to go belly up? One run by a guy like Christie, that’s who. These cretins think that by bankrupting the state they will be able to hand over pension obligations to the feds (who have to honor them) and then cancel all union contracts of those who work for the state.
So if the Wall Streeters are basing their decisions on comments made by a GOP governor (a big, fat one) that the state could go bankrupt, they take that seriously as opposed to a guy like Jerry Brown talking about cuts galore as the assumption would be that a Dem governor would try to raise taxes to fix the problem.
Mike Kay
@Violet: isn’t that the truth.
Bubbles (manias) and even depressions (rush to the exits) are driven on emotion.
The Populist
@Zifnab:
If I was a resident of NJ, right or left leaning, I’d tell fat boy not so fast in talking BK. A bankruptcy hurts the citizens more than government. Ask the citizens of Orange County, CA or Vallejo, CA. They both suffered through services disappearing, less police, etc.
Mike Kay
@Paris:
That’s wasn’t his age, it was his IQ.
Pooh
@The Populist: well that’s only because the people are actually, you know, people and the government, uhm, isn’t.
Mark S.
Is it just me, or did that article not make any sense? It first blames Christie, and then spends the second half saying the reduced bond sale had nothing to do with anything Christie said.
kdaug
Do NOT, under any circumstances, mention the existence or lack thereof of the emperor’s clothing.
Cermet
@D0n Camillo: The real difference is that Casinos could teach wallstreet honesty lessions.
MikeJ
@pragmatism: He should put his best foot forward and try not to step in it.
Ailuridae
I don’t get the point of this last quip:
But a more important thing to me is that it really, really bothers me that our Galtian overlords on Wall Street can’t simply base their financial decisions on empirical evidence, but instead jump like my cat when I turn on the vacuum when someone employs some pretty boilerplate political rhetoric.
Is this directed at Piertronico who is managing the sale of the bonds? He was almost certainly correct to pull some portion of the bonds back. Christie is likely wrong, but having the governor of a state issuing bonds say the state could go bankrupt certainly has an adverse affect on the ability to sell a bond, right?
Or are you talking about prospective buyers of the bonds?
KG
@The Populist: states can’t go bankrupt, they are sovereign. they can, however, simply declare their debts odious and refuse to pay them. That will greatly fuck over the economy, but as it stands that’s the option for a “bankrupt state” in part because there is no provision in the bankruptcy code for a state to go bankrupt.
JGabriel
John Cole:
Actually, John, when the governor of a state says it might go bankrupt, that is empirical evidence. Not proof, of course, but it is evidence that the governor might not be committed to paying back the state’s debts.
Christie deserves every bit of criticism he gets for blowing the value of the bond offering. What a jackass.
.
pragmatism
@MikeJ: its just him v. rudy. the people of nj and ny don’t matter.
GR
JGabriel, you beat me to the punch.
The issue isn’t whether NJ might go belly up. Of course it might. The issue is that Christie is out there giving evidence that he might be crazy enough to stand idly by while it happens in order to score some political points.
Mnemosyne
@The Populist:
Ding ding ding. Considering Christie’s existing string of disastrous financial decisions, I wouldn’t be surprised if the market is getting a little antsy about any New Jersey bonds.
burnspbesq
In a similar vein, Brad DeLong is wondering why the Republicans in Congress are so dadgummed eager to kill something that’s going to be spectacularly beneficial to one of their key sources of cash.
http://delong.typepad.com/sdj/2011/01/the-us-government-brings-the-health-insurance-agency-32-million-new-customers.html
lacp
I thought Christie had made it clear that he was only thinking of defaulting on the pension fund, not any Wall Street debts. C’mon, the dude knows which side his bread is buttered on.
chopper
it couldn’t happen to a bigger sack of crap, but yeah you’re right cole. chairman of the fed brings in a thicker folder and the market takes a dump for the day.
rikyrah
he continues to believe he’s oh-so-smart.
let’s rack up the tally, why don’t we?
400 million lost from Race to the Top funds.
the money they have to pay back for stopping the transportation project killed
and now, his big mouth has cost this.
JPL
@Joseph Nobles: So glenn’s audience is going to eat bacon? Mediaite has the clip
J. Michael Neal
@Paris:
Okay. If you’re so smart, what are those criteria? If you can’t tell me what they are, how do you know that it’s possible?
J. Michael Neal
@Martin:
I don’t think even this would help. A lot of small banks collapsing isn’t any better for the economy than a few large banks doing so. Size really isn’t the issue. What they’re doing is the issue.
Note, for instance, that Canada’s banking sector is significantly *more* concentrated than that of the US, but they didn’t have major problems.
Mark S.
@burnspbesq:
They know it will never pass the Senate and Obama. What they should be worrying about is what happens when the Scalito Five get their paws on it.
Maude
@J. Michael Neal:
#59
Here in NJ we don’t have to worry about banks bringing anything down. We have Christie and I bet a lot of people are jealous. Their govenors haven’t lost their states as much money as Nj’s has.
Christie is truly stupid.
Makes me wonder how he passed a bar exam.
JPL
Chris Christie thinks the way to become the republican nominee is to bankrupt your state. He’ll blame it on previous governors and President Obama.
Cacti
@burnspbesq:
I have a feeling that the private insurance industry is going to have a talk with that Boner fella, since starting this year…
7000 baby boomers a day will become Medicare eligible.
Pooh
@Maude:
If you’ve ever actually practiced law, you know that bar (heh) is set pretty low.
Turgid Jacobian
@scav: That should just be “keeping Koser” or “keeping Kosrut.”
PeakVT
Basket case, no. Run by a bunch of greedy, hypersensitive wussies strung out on blow, yes.
Either way: transaction tax, anyone?
burnspbesq
@Maude:
New Jersey bar exam is easy.
NonyNony
What bothers me more is that a fucking governor saying “hey, our state is gonna go bankrupt” has become boilerplate political rhetoric.
That’s … a bit crazy. Governors used to be very, very careful about saying shit like that because, well, markets spook easily. Hard to get people to buy your bonds if you’re standing on a podium telling them that given a choice between raising revenue to pay the bonds back or going bankrupt, you’re going to pick “go bankrupt”.
(And John, blaming the Galtian Overlords for this one is actually a bit harsh. If you walked into a bank to take out a second mortgage and you told the loan officer that you might lose your job and if you did you weren’t going to do anything to get another one, you think the loan officer would want to give you a loan? Same thing here – Christie is saying “hey, we don’t care about defaulting on our debts and we’re not going to do a thing to stop it if it happens”. I personally would be a bit leery of loaning NJ enough for a cup of coffee until the voters take this tool out and put someone with a bit more responsibility into office.)
Tom65
If they only used empirical evidence as the basis for decisions, the market would be totally predictable and therefore unprofitable. There’s an active interest in maintaining a certain amount of instability.
liberal
@J. Michael Neal:
What they’re doing, plus interconnectedness (aka complexity).