Transcript: Governor Jon Corzine
The following is the unofficial transcript of an interview with New Jersey Governor Jon Corzine on CNBC's "Street Signs."
Burnett: You're sort of the hammer here. Can you get this done?
Gov. Corzine: Well, what is getting it done? Paying down debt, cutting spending, getting us into a position br we have a long-term solution to a structural problem? We've got this complication that
You guys talk about all of the time on CNBC. We're in a recession, in my view, and that is cutting revenues coming in to not only new jersey, but all states and making the problem a lot worse. So we really have two issues. One, spending -- like I say over a long period of time covered up with a lot of borrowing, that, we need to fix, but we also have the problem that we've seen very rapidly declining revenues and that's a problem.
Burnett: Very rapidly declining revenues. I know you've spoken about a recession, but very rapidly declining. Does that mean things are getting significantly bad? How bad is it?
Corzine: we're seeing, for instance, shipments at the port down 15%, New York-New Jersey port. We’re seeing employment growth fall off, the first month of the year over 9,000 jobs lost in New Jersey. That is a problem. Those things are cumulative when you get the same negative value in homes. So you're seeing our sales tax collections go down and we think
We will see, because of the slowdown on Wall Street, a decline in earnings by a lot of the people who work in the northern half of the state. We're very dependent on the financial services industry. So we're not -- we want to be optimistic, but I can't be too much on revenue growth this year.
Burnett: Do you buy the second half recovery?
Corzine: You know, I’m enough removed from all these issues to say that I wasn't that good at that time when i was on wall street, and i would think we were going to go a little deeper just because energy prices are going up. There's actually stagflation. Health care costs are going up and energy prices are going up and food prices are going up so people are getting sdweezed at the sail time that there's a fall off in employment and some of the other issues and states are going have to cut back or raise taxes. One or the other.
Burnett: What do you do in New Jersey? You're in the midst saying I want to raise tolls, cut jobs and cut some services. So it would seem according to traditional economic theory, this is the wrong time to do any of those things.
Corzine: I am not for raising taxes in any immediate timeframe and even the toll plan that I talked about was not supposed to be implemented, it would not be implemented until 2010. It was actually taking into consideration weakness in the economy when we laid it out. The point is that I think that what we needed to do, we need to do is be able to get through this bump. I love to be able to have a stimulus program and in fact, our toll plan would have actually put people to work by working on our infrastructure. That is not going to happen in the short run. The reality is I don't have the votes in the legislature to make it happen. So we'll probably have to reshape it. We're not giving up on it, but we’ll have to reshape it, but the most important thing we have to do right now is get spending down. Almost $3 billion from last year’s level plus inflationary growth and that's a huge, huge lift when states actually should be spending money to stimulate right now.
Burnett: Right. I know we've heard that the statistics and this would only be the fifth time in 50 years that New Jersey spent less money than it did the year before. New Jersey would be a state with a very bloated budget. Is the government is doing right now in Washington, $170 billion stimulus plan. Those checks that will be mailed to New Jersey residences combined with the housing efforts that have in out of Washington. Is it enough or do you sit there as a governor of one of the richest and most popular states saying this is the wrong thing?
Gov. Corzine: First of all, I think they would have been better served by putting money interest places where we have the greatest pressure, into health care. I think they could have helped the states and the public a lot more by putting into Medicaid or charity care and some of the support programs. That money would get spent and would get into the system. It is not clear from previous studies whether these one-time rebates end up being something that people will spend or they save to pay off their debts. In fact, I’ve seen numbers well below 50% of those dollars going into savings directly or into paying down debt. So i'm not sure that we’re getting the biggest bang for our buck. It is something you can do quickly and I’m not opposed to what they're doing. I’m not sure it gets the same level of support it might have been able to do by putting money in the long-term unemployed folks. As i said, health care and a number of other issues or some combination of both.
Burnett: it's interesting. Two of the people you’re speaking to today, the former co-chief Hank Paulson was speaking this morning. He was going into more detail about the government potentially changing some of the regulatory environment around the mortgage situation and around credit ratings approximate. do you think what you're hearing right now, the balance between regulation and non-regulation what you're hearing from Ben Bernanke and -- there he is from Hank Paulson, is it the right solution?
Corzine: I think that they've made steps on a path. I don't think they have gone far enough to actually turn around what is happening in the real world. The $200 billion that is now in what we call the repo market. It goes against a $6 trillion plus mortgage security market. It is very, very small amount relative -- it encourages confidence and I don't deny that and I think we saw the reaction in the markets that way, but I don't think in the scheme of things it goes far enough to get things done and ultimately I don't think the things that have been done out of treasury go far enough until we recognize that we have to have some mechanism to support write-off of debt. In a company went bankrupt they’d negotiate with their banker and they'd lower the amount of debt or stretch out its timeframe or lower rates. We're not doing enough of that on a broad enough scale with the people who are having trouble with their mortgage payments. And I think we need to design a system. it will probably take some kind of financial support from the federal government to actually lower the debt level so that people get back into the modes of being able to retain their homes and pay out.
Burnett: Do you think -- again, the former CEO of Goldman and the former head of the fed banking committee that the government creating a pool, maybe the same size as a stimulus package and going out and buying some of the aaa rated mortgage paper. Some of the CEOs I speak to think that would be a significant think, perhaps more important to bring up the market.
Corzine: I think that's an important element, but you have to put the 200 billion into the context of the ocean of credit that is the mortgage market. It's much, much bigger than that 200 billion. I think what we need to do and, in my view, if you're going to limit the size and then you ought to be putting it into the ultimate user of the credit, the mortgagee, the people that own the houses. I think that actually then gets more leveraged borrowing. Those people get back into the consumer market because they feel like they're going stay there. What's going to happen now is without that kind of support. I think people are going to walk away from their homes that that’s going to deteriorate neighborhoods and you'll see lower values and then you’ll have more homes in a situation where the loan devalue is negative.
Burnett: Do you think that Hank Paulson and Ben Bernanke are doing a good job right now?
Corzine: Oh, I think they're trying very hard, and i think they've taken a lot of the steps. It’s actually the degree to which those things are implemented that I think actually ends up making a difference. Secretary Paulson actually made some suggestions about helping some of the lenders -- or some of the borrowers and the mortgage market that were about to go in to foreclosure. I think we have to deal with the folks that are already there.
Burnett: Whose fault is this?
Corzine: Oh, I think we've had a laissez-faire attitude in a very liberal credit environment that allowed people take on more complexity, more exposure and more risk. It's not unlike markets historically. They get into bubble fever and we got a lot of that into the financial market, but we certainly got it in the mortgage markets and she's just having the normal cyclical pullback. I think it could be a lot more serious because it goes right to the heart of the consumer and it's happening at a time energy prices and food prices are going up.
Burnett: Snd that is what you brought before. You think it will be deeper than what a lot of people think and you brought the point that the slowdown will be deeper and you have inflation, too.
Corzine: As you know, Erin, the best way to think about this is in probability terms as opposed to absolute. I think there's a real risk that we end up with a deeper, longer recession than what people anticipate because we’re really going at the heart of the American economy, the consumer.
Burnett: Snd stagflation, the one thing -- some will say no. Stagflation only happens, Governor Corzine when you've had prices going up for years. It's like the 70s when you have that combination over an extended period of time.
Corzine: if you're going define that stagflation in that context, then you're right, but to the consumer who lives in new jersey, you're in Inglewood or in an ocean port or across the state, they feel the pinch of higher gas prices. They feel the pinch of higher food prices and they feel the pinch of the slashes that we're going to make in our budget because we're not going to be supportive in the same way --
Burnett: One more question former governor Eliot Spitzer were working together on a plan to fix the muni bond crisis. Is that crisis getting better or has there been a change?
Corzine: It's gotten better. Once some of the hysteria came out of the variable rate security market. I think it is settling back down. Unfortunately, what was a very important instrument, by the way, and the insurance piece was up an important part of the muni market as well which is – which has been undermined in its credibility because it got out of the monoline business, and it needs to get back in the monoline business and that's happened and the variable rate security issues, i think unfortunately because there wasn't the backstops of work in the investment banks. I think it's ended up hurting a market that's perfectly reasonable and helped municipalities and states finance
Burnett: Governor Corzine, thank you so much. We thank you for coming? And we forward to seeing you soon.