The Invisible Hand Fisted New Jersey

Nobody could have predicted that Chris Christie’s decision to move pension funds to Wall Street was a shitty idea:

Between fiscal year 2011 and 2014, the state’s pension trailed the median returns for similarly sized public pension systems throughout the country, according to data from the financial analysis firm, Wilshire Associates. That below-median performance has cost New Jersey taxpayers billions in unrealized gains and has left the pension system on shaky ground. Meanwhile, New Jersey is now paying a quarter-billion dollars in additional annual fees to Wall Street firms — many of whose employees have financially supported Republican groups backing Christie’s reelection campaign. […]

In 2009, the year before Christie took office, New Jersey spent $125.1 million on financial management fees. In 2013, the most recent year for which data is available, the state reported spending $398.7 million on such fees. In all, New Jersey’s pension system has spent $939.8 million on financial fees between fiscal year 2010 and 2013. That’s only a little less than the amount Christie cut from state education funding in 2010 — a cut that played a major role in shrinking the state’s teaching force by 4,500 teachers. That money might also have reduced the amount the state needs to pay into the pension system to keep it solvent.

This may sound like a major mistake, but you have to realize that using the free market is kind of like throwing virgins into volcanos or cutting up lambs on an altar: it’s the ceremony, not the results, that are important.

67 replies
  1. 1
    RaflW says:

    And the publicly acknowledged grift – the tripling of the fees – there’s that very non-virginal reason for what they do.

  2. 2
    shelley says:

    Wasn’t that Dubya’s plans to privatize Social Security? Only he made the mistake of announcing it.

  3. 3
    Jerzy Russian says:

    Christ, what an asshole.

  4. 4
    basement cat says:

    At least when you cut up lambs on an altar, you get to have some tasty lamb kabobs afterwards.

  5. 5
    JCT says:

    That title is full of win. At least Christie is truth in advertising – he revels in being an asshole. Not sure what folks there thought they were going to get instead, especially since they re – elected him and therefore had ample evidence .

  6. 6
    Bobby B. says:

    And NJ’s also been raped in the face! (“Hamlet 2”)

  7. 7
    Alex S. says:

    Kleptocracy on every level.

  8. 8
    PurpleGirl says:

    A couple of decades ago didn’t NJ have to borrow some huge amount of money to bring their pension fund current because the state government hadn’t been actually making its contributions to the fund? They incurred some pretty large interest costs because of this action, but then they didn’t have the money to put into the fund.

  9. 9
    Belafon says:

    Are there any black men on Wall Street we can blame this on?

  10. 10
    MomSense says:

    @Belafon:

    Can’t we just blame Obama like we usually do?

  11. 11
    Belafon says:

    @MomSense: We could, but I’m pretty sure, if a Trenton police officer shot Obama, the New York Times article about him not being an angel would come out much quicker than the one for Brown.

  12. 12
    MattF says:

    Look, boys and girls– the big Wall St. firms are out to pick your pockets. Who doesn’t know that? You think Christie doesn’t know that? Ha ha.

  13. 13
    amk says:

    congrats, dems.

  14. 14
    PaulW says:

    @RaflW:

    And the publicly acknowledged grift – the tripling of the fees – there’s that very non-virginal reason for what they do.

    If I were a New Jersey resident, I’d be marching to the nearest pitchfork store to pick up supplies. This is so blatant a rip-off that the voters should be calling for arrests and court interventions.

  15. 15
    balconesfault says:

    The hell with the fees … I’m wondering if the below market performance, if really investigated, could end up being tied to money being thrown at specific investments that pumped up valuations for the politically well connected – who of course would have shown their gratitude by getting out at the top of whatever bubble NJ’s dollars could help create.

    The tripling of fees could be a tip of the iceburg of financial mismanagement.

  16. 16
    big ole hound says:

    Follow the MONEY….if you can through the very shit stained murk of New Jersey politics. And if you think Jimmie Hoffa was buried deeper than the light of day it’s nothing compared to Christie’s corruption schemes.

  17. 17
    Richard Grant says:

    If that frequent visitor to Iowa were somehow elected the next President of the United States, we will get what is being done to New Jersey at a federal level beginning just after noon on January 20, 2017, with the focus on winning that second term by the largest margin in history, and his soulless-crushing boredom settling in just after noon on January 20, 2021.

  18. 18
    low-tech cyclist says:

    Christie’s Presidential hopes continue to be dead. In this case, if he’s a fuckup as well as an asshole, what’s the point? Being an asshole to people in order to cut through bullshit and make sure things are done right might attract some support, but assholery in the service of fuckupery won’t. Maybe Republicans will vote for someone just for the hippie-bashing, but they won’t be able to convince anyone else.

  19. 19
    GregB says:

    Hmmm. The redistribution of wealth upward.

    Why do you hate capitalism?

  20. 20
    Roger Moore says:

    @GregB:

    The redistribution of wealth upward.

    Why do you hate capitalism?

    I think you got those statements out of order.

  21. 21
    Eric U. says:

    we really dodged a bullet when Shrub’s SS plan fell flat. Lots of people thought putting money into the stock market was a good idea. However, even if it was generally a good idea, the republican implementation would involve massive grifting.

    Of course, since SS subsidizes the general fund except under the most dire economic conditions, the whole thing was really crazy from a republican tax cuts for the rich point of view.

  22. 22
    balconesfault says:

    @Eric U.:

    However, even if it was generally a good idea, the republican implementation would involve massive grifting.

    With the necessary back-end government bailouts to make up the money robbed from the till so the elderly wouldn’t go destitute …

    Also known as replenishing the pot for the grifters to swoop in again.

  23. 23
    KG says:

    A billion dollars in fees over three years? Two thoughts:

    1. I went into the wrong line of work
    2. Anyone want to bet on whether these were no bid contracts?

  24. 24
    Matt says:

    it’s the ceremony, not the results, that are important

    Not at all. The results are highly important, and the NJ results are exactly what’s intended: shoveling money from the public treasury into the hands of the 0.1% while fucking things up so bad that MORE austerity will have to happen. It’s looting, plain and simple.

  25. 25

    @KG: I’ve long decided as a parent that if one of my children exhibited sociopathic tendencies, I would do everything I could to encourage them to become an investment banker.

  26. 26
    Villago Delenda Est says:

    Christie should go to prison for this alone.

    It’s theft, pure and simple.

  27. 27
    MattF says:

    @balconesfault: If there’s funny business it’s far more likely to be a well concealed kickback to Christie. Pushing around the market values of securities would attract the attention of the SEC.

  28. 28
    Senyordave says:

    I’m biased because think Chistie’s a bloviating asshole, but his actual record as governor seems terrible. The quick points:

    1. State of NJ is heavily invested in the Revel casino, which obviously is a result of Christie, since he appointed pretty much all involved. Sate of NJ will lose hundreds of millions on this investment
    2. Unemployment in NJ is still at 6.5%, recovery is slower than most similar states
    3. The state of NJ has had its bond rating cut multiple times since Christie has been governor, costing the state a lot, probably a couple hundred million dollars
    4. Bridgegate – At best Christie is clueless, at worst he is criminally complicit and a perjurer

    The only thing he has accomplished is gotten the peopl in NJ to hate on public employees. Chirstie is pretty good at that, I have to admit.

  29. 29
    Villago Delenda Est says:

    Oops, wrong thread! Comment nuked, look for it downstairs!

  30. 30
    gratuitous says:

    What?!?!?! A disinterested party that didn’t care about results or performance, handed over a huge wad of cash to a group of investment bankers, and those fucking greedheads acted like fucking greedheads? My astonishment is off the chart! You mean to say those fucking greedheads treated that money like their own personal piggy bank, taking flyers on high risk investments while being sure to skim off their fees and commissions in advance, so it didn’t matter a bit whether the investment performed or not?

    I just don’t know what to say. But I’m sure that Gov. Christie has a boatload of bombast to unload on anyone with the temerity to question his judgment.

    Okay, now that we’re done with this, can we go back to yelling at those lazy pensioners who just saw their benefits shrink?

  31. 31
    Nicole says:

    A friend recently reposted an article from 2011 about that Pennsylvania judge that was sentenced to almost 30 years for selling kids into the private prison system. That people continue to parrot “private industry works better than government!” boggles my mind, because, honestly, I haven’t seen a single example of this being true.

  32. 32
    Jim says:

    I intend to shamelessly steal/plagiarize your virgin-volcano comment and use it myself. It’s appropriate to so many things in today’s “optical” politics.

  33. 33
    samiam says:

    I’m sure a Koch ‘think tank’ will be able to find at least one Democrat somewhere on Wall Street also getting money from this so BAM…both sides do it!

  34. 34
    gene108 says:

    That’s only a little less than the amount Christie cut from state education funding in 2010 — a cut that played a major role in shrinking the state’s teaching force by 4,500 teachers.

    The cut to the education budget came to off-set the lost revenue from not continuing the millionaire’s tax that McGreevey had enacted, while he was governor.

    EDIT: The Democratic legislature passed the continuation and Christie immediately vetoed it.

  35. 35
    sixthdoctor says:

    Walk around the Revel in Atlantic City. It couldn’t be more over the top if it was made out of stacks of actual money, no one goes there, and this is what our governor poured money into. Such an obscene waste…

  36. 36
    KG says:

    @Nicole: I’d trust private industry to make cars over the government. Id trust private industry to actually do construction of new buildings over government. But, police, fire, prisons, courts, schools? I wouldn’t trust someone out to make a profit in any of those “industries”

  37. 37
    Trollhattan says:

    @sixthdoctor:

    Such an obscene wastewaist…

    Hey, somebody had to.

  38. 38
    Anoniminous says:

    Kauffman Foundation released a report in 2012 analyzing their 20 year history of managed investments. Their conclusion:

    Over the past decade, public stock markets have outperformed the average venture capital fund and for 15 years, VC funds have failed to return to investors the significant amounts of cash invested, despite high-profile successes, including Google, Groupon and LinkedIn.

  39. 39
    Trollhattan says:

    @KG:
    I swear the long-con WRT the Postal Service revolves around that absurd congressional dictate to fund seven decades of the pension, then privatize and loot said pension fund. Just you watch.

  40. 40
    weaselone says:

    I’m fairly certain that New Jersey is not the only state where this has happened. I seem to recall something very similar happening in regards to Rhode Island’s teacher pensions where sizable amounts of pension money were placed with hedge funds, etc. ostensibly as a response to underfunding caused by 1. the great recession, and 2. failure by the state to make their contractually obligated contributions. High management fees rarely deliver the bang for the buck promised in these circumstances.

    The teachers and taxpayers may be doing poorly, but these arrangements seem to have a great ROI for the wealth management companies and hedge funds. A few million in campaign support yields a few hundred million in fees down the line. We are talking returns in the neighborhood of 1,000% to 10,000%.

  41. 41
    Mike in NC says:

    Outlaw Jersey Whale has been out of the spotlight for a few months now. Have the Villagers decided he’s the front runner again?

  42. 42
    Calouste says:

    I read an article yesterday about how Oregon is taking Oracle to court over the problems with the Oregon ACA website. Not for non-delivery, for racketeering.

  43. 43
    Trollhattan says:

    @Calouste: Wouldn’t it be great if a jury found in favor of Oregon and awarded them Lanai?

  44. 44
    Roger Moore says:

    @Eric U.:

    Lots of people thought putting money into the stock market was a good idea.

    Because they don’t understand macroeconomics. Ultimately, the level of services we can offer to retired people depends on just three things:

    1) The ratio of retired people to working people
    2) The overall productivity of workers
    3) What fraction of the workers’ money we choose to devote to retirement benefits

    If we have a system like Social Security, these things work themselves out in terms of tax rates and ages of eligibility. We can increase benefits by increasing the tax rate (higher fraction of workers’ money going to benefits) or by raising the eligibility age (increasing number of workers per retired person). If it’s handled through the stock market, it’s worked out by the ratio of buyers (workers) to sellers (retired people) and the amount of money the buyers have to invest (mandatory investment rate). If there are more workers per retiree, the stock market is a seller’s market and returns go up; if there are fewer workers per retiree, it’s a buyer’s market and returns go down.

    The only way converting Social Security into a stock market system actually improves things- for ordinary people, at least- is if investing in stocks causes the economy to grow faster, increasing productivity and thus the overall standard of living. The obvious winners are the brokers, middle-men, and other parasites who benefit from an increase in the number of people investing. Slightly less obvious winners are people who already have lots of investments, who will see their values increase from the money moving into the market. IOW, the main goal is to force people in at the bottom of the pyramid scheme.

  45. 45
    Trollhattan says:

    @Mike in NC:
    I presume he’s laying low, stealth-running and waiting for the various other Republicans to crash and burn on their own. Considering recent party history and the quality of the competition, not a bad strategy. His outsized, uh, ego certainly will keep him in it, even if reality does not.

  46. 46

    To echo others above, there are no downsides here from the Republican point of view. Dogma is followed despite being disproven by facts. A politician gets to enrich his backers and friends. People are hurt. The lost money provides an excuse to hurt more people. Public education is threatened. These are all things that send a tingle up the leg of conservatives, be they Wall Street, elected official, or cultural conservative. None of them are side effects. All of them are central to the Republican ethos.

    @Nicole:
    Reagan created this line. It means ‘Government services are responsible for black people getting to act like they’re as good as whites.’ Extra emphasis on how black people were lazy and living off of hard-working white people’s money. He was not at all subtle.

    If you look at it like that, they’ve got no reason to abandon the mantra. A black man even became president!

  47. 47
    Roger Moore says:

    @Nicole:

    That people continue to parrot “private industry works better than government!” boggles my mind, because, honestly, I haven’t seen a single example of this being true.

    Depends on what you want it to do. If your main goal is to ship money to the 0.1%, private industry is the only way to go.

  48. 48
    SatanicPanic says:

    @KG: I’ve been reading a lot on public housing in the USA, and the results were actually pretty good, minus some very high-profile failures i.e. in Chicago.

  49. 49
    Gin & Tonic says:

    @weaselone: The problems in Rhode Island are many, but underfunded municipal pension plans are a problem nearly everywhere. I don’t know where you live, but take a close look at your town/city/county/state (as the case may be) municipal pension plan – what is the contribution rate, what is the funding percentage, what is the assumed rate of return? Cutting contributions is always an easy path to short-term solvency, because the ill effects are many years away, and somebody else will be in office then, yet generous pension benefits are easy to promise, and really the only recourse to increasing salaries, which in this day and age is always a hot-button issue. Yet lots and lots of pension plans are blithely going along, assuming a rate of return of, say, 8%, which you can’t get. So they get further and further behind.

  50. 50
    Kay says:

    @Roger Moore:

    Anyone who proposes privatizing Social Security should be barred from public office simply because they have no idea how a huge group of people live. I cannot tell you how many people have brought me those Social Security statements you get in the mail and asked me to reassure them that it means what they think it means.

    They have nothing, because they never made any more than the bare minimum to survive. They’re terrified. Taking that away or adding risk is cruel. There’s no other word for it. To me, it’s the ultimate out-of-touch round table “conversation”.

    Just STFU about the one thing they count on. Leave it alone. Look elsewhere for commissions and transaction fees. I know it’s a huge pot of money and they can’t wait to get their hands on it, but, no. Think of some other money-making scheme. That’s why they make the big bucks- they’re “innovators”, right?

  51. 51
    Sherparick says:

    @RaflW: You “betcha” as Princess Dumbass of the Northwoods would say. Christie was in tight with Wall Street while still a U.S. Attorney for New Jersey. Also, as someone once said, its not the stuff that illegal that is a shame, but what is legal and allowed.

  52. 52
    Kay says:

    @Sherparick:

    Also, as someone once said, its not the stuff that illegal that is a shame, but what is legal and allowed.

    I think something has to give there. though. The people who write the laws can’t just keep relying on “it’s legal!” for what is corrupt and self-interested behavior. That works for a while but no one in the normal world really gives a shit what the statute technically says and that’s not what they’re asking for anyway. They’re asking for them to work on the public’s behalf. If they’re NOT doing that, relying on “legal” is irrelevant at some point.

    They can’t set the bar at the lowest point which is “not illegal” and expect people to adopt their incredibly low standard, particularly if they’re writing the laws.

  53. 53
    slag says:

    I’m shocked shocked to find that gambling going is on in this establishment!

    The shock market claims its winnings once again.

  54. 54
    Gene108 says:

    @Frankensteinbeck:

    The notion blacks are lazy, crime prone, sexfiends is about as old as America. Politicians playing to white prejudice against blacks is just as old.

    Reagan convinced whites that government no longer worked for them, therefore the solution was to dismantle government programs that helped people. Whether it was government taking away their muscle cars, in the name of CAFE standards and lead poisoning or black people getting access to the same benefits as whites, Reagan managed blow cement people’s distrust of government formed in the 1970’s.

  55. 55
    cckids says:

    @balconesfault:

    I’m wondering if the below market performance, if really investigated, could end up being tied to money being thrown at specific investments that pumped up valuations for the politically well connected

    Yeah. Because, since that “soc*alist” Obama’s been in office, the stock market has hit record highs, again & again. How are they losing money again? (besides the fees)

  56. 56
    Roger Moore says:

    @Kay:
    I may have to disagree with you a bit on this one. If privatizing Social Security would help to achieve that, it would be worth doing, even if people are scared of it; if it diverts their retirement money to Wall Street parasites it is worth avoiding, even if it’s a popular idea. The reality of the program always has to be top priority; people’s hopes and fears about it are still important, but they can be managed with education and outreach. IOW, you can reassure worried people that Social Security is being honest and their money really will be there, but only if the program is solvent and their money actually will be there.

  57. 57
    Roger Moore says:

    @cckids:

    How are they losing money again?

    They aren’t actually losing money; they just aren’t making as much as they would have if they had put the money in index funds.

  58. 58
    rikyrah says:

    @Kay:

    Anyone who proposes privatizing Social Security should be barred from public office simply because they have no idea how a huge group of people live. I cannot tell you how many people have brought me those Social Security statements you get in the mail and asked me to reassure them that it means what they think it means.

    They have nothing, because they never made any more than the bare minimum to survive. They’re terrified. Taking that away or adding risk is cruel. There’s no other word for it. To me, it’s the ultimate out-of-touch round table “conversation”.

    tell it Kay.

    tell it.

  59. 59
    rikyrah says:

    the point wasn’t to grow the pension funds.

    the point of this scam was the tripling of the fees.

  60. 60
    Suffern ACE says:

    @rikyrah: yep. And then blame any shortfall on the greedy demands of employees.

  61. 61
    daveNYC says:

    @rikyrah: True, but at least a halfway competent scammer would have managed a decent rate of return.

  62. 62
    Jado says:

    @JCT:

    I believe that my fellow Jersey voters thought they were getting someone who was loud and certain of himself and his place in the universe, just like all the rest of us Jersians. Brash. In yer face. Upright and proud and an all-around good fellow. A person of the land. Common clay of the proud home state

    You know, F’ing morons.

    Well, except for the hedge fund managers – they knew EXACTLY who they were getting – the guy they paid for.

  63. 63
    gene108 says:

    @Jado:

    Well, except for the hedge fund managers

    Considering Gov. Corzine’s background this is highly ironic, with regards to who they backed in 2009.

    I believe that my fellow Jersey voters thought

    I think in 2009 it was a “throw the bums out” mentality, because the economy sucked and Corzine failed to kiss the rings of the Democratic power brokers and pissed off traditional Democratic constituencies by being high handed, which hurt his over all popularity.

    In 2013, Christie had bribed won the support of enough Democratic power brokers that he did not face serious opposition, with regards to an opposition party throwing everything it had to unseat him, rather than have a significant number of high profile NJ Dems endorse him and publicly undercut his opponent.

    Christie’s biggest asset is a Democratic legislature that has kept him from copying the excesses of guys like Brownback and Corbett, so people do not associate him with endorsing such reckless policies, even though he’s every bit as conservative as those guys.

  64. 64
    Waynski says:

    @JCT:

    At least Christie is truth in advertising – he revels in being an asshole. Not sure what folks there thought they were going to get instead, especially since they re – elected him and therefore had ample evidence.

    I think you need to keep things in perspective. Christie got re-elected by the people of New Jersey, because of Hurricane Sandy and a remarkably underfunded democratic candidate. Fat as he is, he could have walked on water in these parts at the time, mainly for taking his own party’s Congresscritters to task for holding up the help that we so desperately needed. Try watching fishing boats launched into your parking lot and going without heat and electricity for ten days and the only guy out there fighting for you is Chris Christie. I voted for Barbara Buono anyway, but there was no way that so shortly after the storm he wasn’t going to win that election.

  65. 65
    JCT says:

    @Waynski: Yes, I know – lived in NYC for 30 years, just left a couple of years ago. And Buono was not a great candidate. I don’t disagree that this one was a foregone conclusion.

    But Christie has been a bloviating asshole since time immemorial and a fair number of my NJ colleagues were apoplectic about the the tunnel and Xanadu in the Meadowlands, among all of his other questionable decisions during his first term. His performance during Sandy was appropriate for a sitting Gov, nothing more.

  66. 66
    JaneE says:

    I hope the Democratic candidate campaigns on “Christie cut education to pay Wall Street cronies to lose money for pension fund”.

  67. 67
    gene108 says:

    @JaneE:

    I hope the Democratic candidate campaigns on “Christie cut education to pay Wall Street cronies to lose money for pension fund”.

    You think this wasn’t done?

    As Waynski noted, people have been pissed at various things Christie has done individually, but collectively they amount to nothing, because – for whatever reason – none of these things stick to him in the minds of voters.

    There’s the guy, who cut education funding by $800 million, in 2010 and there’s the Governor, who will tell it like it is. People do not seem to be able to connect the two things as being done by the same person.

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