Friday, October 23, 2009
Just in from Bloomberg ... it appears that Goldman Sachs is again getting the better end of a financial transaction with those who think that the investment bank is there to help them.
New Jersey taxpayers are sending almost $1 million a month to a partnership run by Goldman Sachs Group Inc. for protection against rising interest costs on bonds that the state redeemed more than a year ago.That probably won't help the taxpayers of New Jersey in their quest to remove themselves from atop this list of highest property tax states.
The most-densely populated U.S. state is making the payments under an agreement made during the administration of former Governor James E. McGreevey in 2003, when New Jersey’s Transportation Trust Fund Authority sold $345 million in auction-rate bonds whose yields fluctuated with short-term interest costs. The agency finances road and rail projects.
“This vividly shows the risk of entering into interest- rate swap agreements,” said Christopher Taylor, former executive director of the Municipal Securities Rulemaking Board in Alexandria, Virginia. “The world’s got to see what stupidity even the sophisticated investors like the transportation fund can get into.”
While New Jersey replaced the debt with fixed-rate securities in 2008 after the $330 billion auction-rate bond market froze, the swap -- in which two parties typically exchange fixed payments for ones based on floating interest rates -- isn’t scheduled to expire until 2019.
More on Goldman Sachs here from the other day - something about imperialism...