When there is a very close relationship between government officials and a business enterprise that profits from the official’s favoritism in granting permits, tax breaks, or state business, it is called crony capitalism. Crony capitalism is a questionable practice in any situation, and should be regarded as highly unethical when ties between a business and a politician are self-serving to both parties and damages the people the politician purports to serve.
Anytime unethical behavior is revealed lately, it is a fairly safe bet that a Republican is involved, and more often than not it is a Republican governor helping their donors profit at the expense of taxpayers. New Jersey Governor Chris Christie is no stranger to questionable ethics and corruption, and although helping financial institutions profit to the tune of nearly a billion dollars to “manage” state pension funds may not be illegal, it is an atrocity New Jersey residents should be up in arms over; particularly because that is about how much Christie cut from New Jersey’s education fund.
It was recently revealed that in the year before Christie became governor, 2009, New Jersey’s financial management fees for “investing” state pension funds was $125.1 million. In 2013 alone, the state spent $398.7 million on such fees and between 2010 and 2013, the state’s pension system spent a whopping $939.8 billion which is slightly less than cuts to New Jersey schools that cost over 4,500 teachers their jobs.
In 2010, Christie’s administration openly touted the benefits of sending New Jersey taxpayer dollars to major financial institutions due to Christie’s appointment of a longtime private equity executive, Robert Grady, to manage the state’s pension money. Grady’s big idea was putting the pension funds, part of the public trust, into high-risk hedge funds Grady promised would “maximize returns while appropriately managing risk.” Subsequently, the promised returns have not materialized but the the Wall Street firms, including Grady’s old firm The Carlyle Group, have benefitted greatly in great part because since Christie took office, the fees the state pays financial managers have more than tripled. Still, the “maximized returns” are nowhere to be seen.
Despite the over 300% hike in management fees, the pension funds’ returns (15%) are lagging the national average of 17.9% according to analysts. Some of the funds are managed by a Chris Christie donor, Paul Singer, who along with David Koch desperately wants the corrupt governor to run, and win, the right to sit in the White House; likely in anticipation of privatizing Social Security and federal employees’ pensions and sending the funds to hedge fund managers to increase costs to taxpayers by 300% and less than normal returns.
New Jersey taxpayers have already lost billions ($3.8) in “unrealized gains” and Christie’s gift to his wealthy donors has left “the state’s pension fund on shaky ground” according to financial data analysis firm Wilshire Associates. Further, the extra billion dollars Christie’s crony’s are charging the state to “manage” in risky hedge funds would have been better suited funding the already lacking New Jersey pension system. New Jersey’s pension fund is already $47.2 billion short to fulfill benefit promises to retirees Christie is claiming why the state’s retirees have to take substantial cuts; something he claimed investing in Wall Street would prevent. The bloated “management fees” could also have went a long way to preserve over 4,500 teacher jobs and adequately fund public schools. However, Christie’s focus is on rewarding his Wall Street donors not only for their very substantial past support in Christie’s re-election campaign, but for their big push to see him run for president.
Prior to shifting the state employee’s pensions funds into private equity, venture capital, real estate and other “alternative investments, opponents of handing billions over to Wall Street warned that the below-average returns were no accident; they were the “inevitable byproduct of Christie’s strategy of taking retired state workers retirement and delivering it straight to Wall Street money managers’ pockets. According to Jim Marketti, one of the State Investment Council member voting against Christie’s scam to enrich his Wall Street donors said, “The leading players on the New Jersey State Investment Council were from the alternative universe and all of their decisions were driven by a political agenda. The facts were that you simply couldn’t justify these investments on the basis of what they cost in fees to generate a dollar of new returns,” Marketti warned the council in early 2011 that such risky investments would be “a roller coaster ride on which only the Wall Street professionals and insiders are the winners.” It was precisely what Christie’s intent was as recompense to Wall Street for funding his campaigns and exactly what Marketti, and any human being with a brain, knew would happen. If New Jersey retirees’ pensions lost value, education funding suffered, the state’s pensions are underfunded, taxpayers lost $3.8 billion, and 4,500 teachers lost their jobs, then as Speaker John Boehner is prone to say, so be it; at least Christie’s Wall Street cronies got their profits.
One might say what Christie did, and continues to do, in raiding New Jersey’s pension funds for his Wall Street cronies’ enrichment is a cautionary tale, but that would be wrong. It is exactly what Republicans long to do with all pensioners’ retirement and particularly their long sought-after goal of privatizing Social Security. The Koch brothers’ funded State Policy Network is busy in every state in the nation pushing the practice along with the Kochs’ other legislative arm the American Legislative Exchange Council. Social Security in particular is a safe guaranteed return on retirees working life pension investments that Republicans desperately want transferred to Wall Street where private hedge fund managers, vulture capitalists, and other “alternative investors” can squander retirement funds away after they skim their billions off the top in “management fees.”
Christie’s crony capitalism may not be illegal, but it is certainly unethical because his only purpose was stealing New Jersey retirees’ pensions, cutting education funding, and putting pension funds on “shaky financial ground” for the sole purpose of enriching his campaign donors. And make no mistake, with the Koch brothers and Wall Street touting and funding a Christie run for the White House, what corrupt Chris Christie did in New Jersey pales in comparison to what Republicans will do to the entire country if they get the chance.
Born in the South, raised in the Mid-West and California for a well-rounded view of America; it doesn't look good.
Former minister, lifelong musician, Mahayana Zen-Buddhist.
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