Monday, July 22, 2013

Cuomo Doing Stand-Up

Ha! Ha! We all laughed.

Politico reports Andrew Cuomo

says the comeback candidacies of disgraced New York politicians Anthony Weiner and Eliot Spitzer are all part of New York’s “charm.”

“It’s part of the charm of New York, you know. We tend to have the eccentric, we tend to have the entertaining, and this is a little political theater. I think that’s all people think of it,” Cuomo, who has made ethics reform a top priority in Albany, told CBS’s Jan Crawford in an interview aired Monday.

Crawford asked Cuomo, who was in the Adirondacks for a white-water rafting event to showcase tourism in all parts of New York, if the pair’s bid for office was good for the state.

“Everyone knows New York has great theater also, right?” Cuomo said. “It is great theater. It’s great political theater.”

Cuomo, whose name has been floated for 2016, also said he was “not at all” thinking about running for president.

Wink, wink or as The Daily Beast's Dan Gross puts it, "Cue the tabloid jokes about Spitzer’s self-immolation in a prostitution scandal."  But Gross explains

New York City, along with New York State and many other jurisdictions, engages in the practice of putting crucial financial and money-management decisions in the hands of elected officials, rather than in the hands of career bureaucrats. And because of the city’s size and financial heft, there’s a lot at stake. The comptroller oversees the city’s five public-employee pension funds, which combined have about $140 billion in assets and manage money on behalf of 237,000 retirees and 344,000 employees of the city and related entities. The comptroller also helps deal with bond issuance. New York City has about $41 billion in general-obligation debt outstanding. In 2012, the city issued $8.1 billion in new-money bonds, and sold another $6.6 billion in bonds to refinance existing debt at lower interest rates.

The stakes are extremely high. The costs of poor management in these areas are massive, for all taxpayers. The potential for corruption and debacles is pervasive. Municipal finance has historically been a cesspool of conflicts of interest—investment firms help fund the campaigns of officials who dole out underwriting assignments, and the revolving door swivels rapidly. Money-management assignments are often doled out less on merit and more on personal connections. Wall Street firms have routinely sold financial products and investment strategies to unsophisticated city and state money managers that wind up causing big losses for the taxpayers. Alabama’s largest county effectively filed for bankruptcy after having engaged in a complex derivatives transaction with JPMorgan Chase.

And so the sort of person you’d want in the post is somebody who knows Wall Street inside and out, who can see through the conflicts of interest and b.s. that Wall Street firms peddle, whom Wall Street regards as someone to fear rather than a mark, and who has sufficient financial resources that he or she won’t be tempted to dole out favors to money managers in exchange for the prospect of lucrative post-government employment.

Spitzer fits those requirements perfectly. 

The Comptroller of the City of New York does not directly control the $140 billion in assets in the city's five public-employee pension funds; the city contracts management of the assets to outside investment management firms.  Nevertheless, in the words of the current comptroller, the office does "develop overall investment policies, standards and guidelines."Spitzer himself has remarked

Imagine if the pension funds and endowments that own much of the equity in our financial services companies demanded that those companies revisit the way mortgages were marketed to those without adequate skills to understand the products they were being sold. Management would have to change the way things were done.

Alternatively, a comptroller could be irresistibly tempted to make a major, yet less dramatic, reform. Early in July, Kevin Roose noted that each of the pension funds is run independently and  

each pays its own consultants, hires its own investment managers, and sits under its own board of trustees. There are about 60 trustees between the five pension funds and few professional investors among them

Since all the pensions share a goal of maximizing returns, a much better solution would be to consolidate all five agencies under one roof, hire a world-class team of investors to invest the entire pool of money, and cut out a bunch of costs and red tape. Being a single $140 billion pension fund network, rather than a group of five smaller funds, would harness advantages of scale and allow the fund to negotiate for better fee arrangements with private-equity firms and other outside investors. And it would make it possible to attract investing pros to run the fund, rather than boards made up of union representatives and political appointees.

But that would slash the power of the office.  A day earlier, Roose and Dan Amira had suggested the former state attorney general and governor would as comptroller

be able to flex that moral muscle in any number of other situations. He could declare, for example, that the city would no longer invest in funds that owned shares of tobacco companies, casinos, or food chains that used GMOs. These powers have always existed among managers of large pension funds, but they're rarely used. Spitzer, though, seems to relish the chance to bring them back into vogue. The size of New York's pensions means that it "owns the market," he said in another interview with WNYC this morning.

Spitzer could also bring back some of his old prosecutorial zeal, going after corporate executives and boards when they screw up. Interest-rate-rigging banks, crooked consultants, overpaid chieftains like Spitzer's old nemesis Richard Grasso — all of these types could come under the comptroller's microscope. Again, these powers have long existed but rarely been exercised effectively.

Before Spitzer does anything, he would have to survive against Manhattan Borough President Scott Stringer a primary whose victor would win the general election.   But whomever wins, there is  a great deal at stake in this race and Eliot Spitzer's candidacy is nothing if not intriguing.  The candidacy- and the race- deserve far more than a patronizing remark about "great political theater" from the state's governor.

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