New Jersey to become ENRON!!!

While driving to my daughters basketball practice this morning I happened to catch part of Steve Cordasco's Big Money show on 1210-WPHT. The topic of the segment was an analysis of Governor Corzine's asset monetization plan. I was immediately interested because this show typically has only experienced investment counselors explaining current trends, companies and various investment vehicles.

The most intriguing part of the discussing was the fact that they were laughing about the plan. Yes, laughing. Their assessment was the the Governor has no idea what to do about NJ's financial situation so he is going back to what he does know-finance. But remember that Corzine is a veteran of the types of company fluffing techniques that produced Enron.

They then walked through the program. Corzine has a problem with too much debt service in NJ. So Corzine sets up a corporate entity owned by the state. This 'corporate' entity buys the state's debt and then issues debt of its own theoretically at a lower interest rate-or not. Now New Jersey gets a better debt rating to have more financial flexibility. But the net is a complete shell game.

There has been no discussion of reducing spending. As a matter of fact, just last week the legislature added 500 million in new spending for schools. This is like restructuring credit card debt. If you consolidate your credit cards to a single lower rate loan, you only improve your financial situation by stopping the spending practices that caused the debt and then make sure you consistently pay down the restructured loan.

The governor suggests a spending freeze. But that concept is deceptive. What he is really suggesting is a spending GROWTH freeze. So he has no intention of cutting back-if he sells off the toll roads to pay debt, he fully intends to start spending again putting off the bill to another administration. It is very interesting that the first big toll hike will come AFTER his next election campaign in 2010.

When experienced financial people laugh at this plan I have to wonder who the joke is on. Now I know-the New Jersey taxpayer.

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