X

Gov. Christie Shifted Pension Cash To High Risk Funds, Cost Taxpayers $3.8 Billion

Remember that old Republican slogan, "Running government like a business"? And how it always ended us costing us money?

Well, there you go. The "means what he says and says what he means" Chris Christie has built up support for his presidential run by setting up an arrangement where Wall Street bankers could skim large fees off the top of pension funds, and then turned around and blamed state retirees for the shortfall. This kind of expensive nonsense is what we always get when voters are naive enough to put Republicans in charge:

Gov. Chris Christie's administration openly acknowledged that more New Jersey taxpayer dollars were going to land in the coffers of major financial institutions. It was 2010, and Christie had just installed a longtime private equity executive, Robert Grady, to manage the state's pension money. Grady promoted a plan to put more of those funds into riskier investments managed by Wall Street firms. Though this would entail higher fees, Grady said the strategy would "maximize returns while appropriately managing risk."

Four years later, New Jersey has secured only half the promised results. The state has sent more pension money to big-name Wall Street firms like Blackstone, Third Point, Omega Advisors, Elliott Associates and Grady's old firm,The Carlyle Group.

Additionally, the amount of fees the state pays financial managers has more than tripled since Christie assumed office. New Jersey is now one of America’s largest investors in hedge funds.The “maximized returns” have yet to materialize.

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.

Those who originally opposed the state's shifting of pension funds into hedge funds, private equity, venture capital, real estate and other “alternative investments” see the below-average returns as no accident but an inevitable byproduct of the strategy: The Christie administration has effectively taken money from retired state workers and delivered the cash to Wall Street money managers.

More C&L
Loading ...