The Campaign Spot

Chris Christie’s Conference Call: And You Thought You Had Heard the Last of Enron

Still down significantly, embattled New Jersey governor Jon Corzine is trying to make

ethics an issue against Republican Chris Christie, citing a loan by Christie to one of his subordinates, Michelle Brown. (For perspective, Christie convicted or got guilty pleas from 130 lawmakers of both parties in his days as U.S. attorney; the FBI raided the home of a member of Corzine’s cabinet last month.)

Now Christie is firing back, bringing up Corzine’s past actions at his old firm, Goldman Sachs:

When Governor Corzine was Chief Executive Officer of Goldman Sachs, he spearheaded the invention of a new security — one meant to allow his client, Enron, to parade massive debt as equity. Monthly Income Preferred Securities (MIPS) were “designed in such a way that it could be called debt or equity, as needed. For the tax man, it resembled a loan, so that interest payments could be deducted from taxable income. For shareholders and rating agencies, who look askance at overleveraged companies, it resembled equity” (John McKinnon and Greg Hitt, “Double Play: How Treasury Lost In Battle To Quash A Dubious Security,” Wall Street Journal, 02/04/02). This loophole, which allowed billions in debt to be hidden, eventually led to Enron’s implosion and resulted in lost pensions for hard-working Americans, including $61 million from the New Jersey’s own pension fund.
This point was poignantly illustrated when the Clinton Administration attempted to rein in Goldman Sachs’ questionable accounting practices for Enron before it was too late: “To top officials at the Clinton Treasury Department, the so-called Monthly Income Preferred Shares, or MIPS, looked like a charade – a way for companies to mask the size of their debt while cutting their federal tax bill” (John McKinnon and Greg Hitt, “Double Play: How Treasury Lost In Battle To Quash A Dubious Security,” Wall Street Journal, 02/04/02). The Clinton Administration’s U.S. Treasury took aim at the risky and manipulative tax haven, but their efforts to stymie Enron’s foreseeable collapse were torpedoed by an aggressive lobbying campaign led by Jon Corzine, who went as far as to lobby President Bill Clinton with a personal letter of appeal: “One letter, signed by Jon Corzine, then chief executive officer of Goldman Sachs, and 34 others portrays the Treasury as attempting to draw ‘completely arbitrary lines’ between debt and equity” (John McKinnon and Greg Hitt, “Double Play: How Treasury Lost In Battle To Quash A Dubious Security,” Wall Street Journal, 02/04/02).

On a conference call with reporters today, Christie described his rival:

He has a trader’s mentality. What traders do every day is to think about how to make that trade at that moment as profitable as it can be at that moment. He collected $59 million in fees, but never considered the long-term ramifications. We see this same attitude as governor always looking for the quick fix. Look at this year’s budget – he had to get the budget story out of the paper because it was hurting him politically. He made a bunch of quick-fixes, and the independent financial analysis firm Moody’s downgraded our credit outlook from stable to negative and specifically cited that budget.

We saw it regarding his primary night election antics. He wanted Vice President Biden to appear with him, but it was clear the Vice President wouldn’t cross a picket line with the CWA [Communications Workers of Association]. He just wanted to get the trade done so he decided to give a sweetheart deal to the CWA, not worrying about the long term ramifications. He wanted to just get the trade done for that day just to help himself. It’s a pattern, a pattern of conduct – he’s a trader and traders only worry about getting the trade in front of them done so they can get what they want in their pocket, whether it’s money or their political fortunes . . .

When he was running in 2005, he said his Wall Street experience was going to help make the state fiscally sound. When we look back on his term as Goldman Sachs CEO, we should have known better. We had the lowest unemployment in the region when he took office in 2006, now we have the highest in the region. We have the highest tax burden in the nation. He’s a trader,  and it shows in his short-term, quick-fix mentality. There’s a place for those who think like traders in this country, but it’s on Wall Street, not on State Street [where the Governor’s office is located].

A reporter asked how Christie could lament the “drumbeat” about the loan to his subordinate and then bring up Corzine’s actions from a decade ago. Wasn’t this settled? Christie replied, “I don’t think this thing has been fully vetted . . . Beyond that, we have to see this in the context of his record as governor.”

On the conference call, Christie expressed a bit of frustration with all the focus on his loan to his subordinate, when the state’s political establishment is being arrested in droves for bribery and organ-smuggling. It seems pretty clear that the Christie campaign wants a couple days of headlines that include CORZINE and LOBBYIST and ENRON in large print. Maybe this will prove an effective counterpunch, or a necessary one. For me, when you’re a challenger going up against an unpopular sitting governor with 9.3 percent unemployment, it’s usually best to keep the theme simple: “He said he would improve life in our state. He didn’t, and now things are worse than when he began. It’s time for a change.”

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