Malloy To Hedge Funds: ‘I’m Not Interested In More Regulation’
by Sarah Darer Littman | Sep 23, 2011 5:00am
(17) Comments | Commenting has expired
Posted to: Business, State Budget
GREENWICH—Gov. Dannel P. Malloy wasn’t afraid to lead with his chin Thursday morning when he gave a keynote address at the Connecticut Hedge Fund Association’s Global Alpha Forum.
Malloy, in addition to boasting about his handling of state finances, told his wealthy audience what it wanted to hear: that he won’t seek to add to their regulatory burden.
“Simply put, Connecticut hasn’t done a good job of creating jobs over the last 22 years…in fact it’s one of three states that has failed to create any net jobs,” Malloy said.
That, combined with the recession and the “fairly routine conversations” between legislature and successive governors about whether to cut services or raise taxes led to the mess he inherited upon taking office.
“I was handed a $3.5 billion deficit, the largest per capita deficit in United States, and I was asked to deal with that…representing 18 percent of revenue that debt was too big to our tax way out of and too big to cut way out of.”
Acknowledging “the new normal is difficult,” Malloy touted the steps his administration has taken to deal with that deficit in his nine months in office, and admitted that while this solved the current crisis, he continues to grapple with the size of government. Between now and Oct. 1 the state will shed “between 500-1000 additional employees” who have opted to retire early.
The hotly debated agreement with state employees will save $21.5 billion over 20 years – much of it post-employment benefits.
“You’re looking at the first governor in the state of Connecticut’s history to fully fund pension obligations,” Malloy said. This will enable him to push forward with the move to Generally Accepted Accounting Principles, which the state has required of local municipalities and boards of education, but never for itself.
Three of the state’s municipalities rank in the top ten hedge fund capitals, and Malloy ascribed this to the state’s favorable tax structure. In a pointed reference to rival New Jersey Gov. Chris Christie, who is addressing the conference Friday morning, Malloy pointed out that while top personal income tax rates in New Jersey and New York are 8.97 percent, even with the increase in the recent budget, Connecticut’s rate is still lower, at 6.7 percent. A New York City resident, paying city and UBT tax, forks over an effective tax rate of 16.85 percent, which is why the industry has made a home over the border in towns like Greenwich, Stamford and Westport.
Throw in the fact that Connecticut’s estate tax is also lower than its neighbors – 12 percent versus 16 percent in both New York and New Jersey – and it turns out the state is a pretty good place to live and die compared to others in the region.
Clearly trying to reassure his audience, Malloy said state regulations to comply with tighter federal requirements for hedge funds with capital of less than $100 million will be done “in a supportive way.” In a further assurance to an industry that an audience member termed the state’s “crown jewel,” Malloy said that he is not in favor of moving to regulate beyond federal policy.
Excessive regulation, Malloy said, has been one of the two overwhelming messages he’s heard from businesses on his jobs tour. “There is too much regulation and decisions are made far too slowly…. Let me very clear I’m not interested in more regulation. I’m trying to streamline regulation,” Malloy said. “We know the old adage that time is money… we need to move more rapidly and responsively.
Tags: Malloy, taxes, jobs, regulation, hedge funds, Christie, New Jersey, New York, Connecticut
(17) Comments
posted by: Disgruntled | September 23, 2011 8:37am
Dan is not interested in regulation.
Tell that to Bernie Madoff. Michael Berger.Martin Frankel.The ghosts of Robert Vesco and Bernie Cornfeld or the hundreds of fiancial “wizards”,many of whom called Connecticut home,for good reason. Wizards that scammed with ease due to a lack of regulation. Beacon Hill. Lipper&Co;.,Galleon,Amaranth,Pequot,LTCM…the names change but the result is the same. Now,people like Izzy Englander just write $180M checks to pay fines and go back to “business”. That is the kind of regulation that Dan seems to want. The kind that gave us Countrywide,Lehman,Wa-Mu.The kind that results in nice campaign donations,right Dan?
posted by: Noteworthy | September 23, 2011 9:13am
uh, Governor - you haven’t created any jobs either and your tax policies have now made sure you won’t. Thanks for nothing. oh, and by the way, you did tax your way out of a deficit. Have you forgotten the $3 billion in new taxes you levied on us just a couple months ago? D.A.
posted by: saramerica | September 23, 2011 11:59am
One of the most ironic moments of being in that room for me was listening to a hedge fund manager complain about how she had a lien on her house for a year because NY State didn’t realize she’d paid her property taxes, and asking Malloy, “Does the government even know what’s coming in and going out?”
All I could thinking of was how one trader at UBS just lost $2.3 BILLION, allegedly without management having a clue, and I would have loved to ask her the same question.
posted by: GoatBoyPHD | September 23, 2011 1:29pm
My favorite charts on CT private sector job creation from the CT Department of Labor
Manufacturing 1990-2011
http://www1.ctdol.state.ct.us/lmi/ManuChart2.asp
Information Technology
http://www1.ctdol.state.ct.us/lmi/InfoChart2.asp
posted by: GoatBoyPHD | September 23, 2011 1:33pm
Then there’s the captive markets of education and medicine funded by runaway tuition loans and runaway medical insurance premiums and runaway tax increases for Medicare/Medicaid.
http://www1.ctdol.state.ct.us/lmi/EducationChart2.asp
And govermment? Oh yes!
http://www1.ctdol.state.ct.us/lmi/GovernmentChart2.asp
Must we really ask how jobs are created in CT?
posted by: NOW What? | September 23, 2011 3:59pm
Malloy is correct in his approach to this matter. Such funds are *inherently* risky, and over-regulation of them would defeat their very purpose. Anyone not wanting to take such risk should simply avoid investing in them. And their regulation is *primarily* the purview of the FEDS, *not* the states.
posted by: Martha H | September 23, 2011 6:13pm
saramerica,
Thanks for being a fly on the wall to relate that story. I suspect we could have 1,000 Enrons and 10,000 Lehman Brothers, and “true believers” (or bs’ers) would *still* trumpet: “We need to run gov’t more like a business!”
posted by: GoatBoyPHD | September 23, 2011 6:49pm
As long as we allow the creation. manipulation, and marketing of investment vehicles without prior risk assessment, SEC regulation and FASB accounting and audit standards the system will remain reactionary.
Pension robbing, the S&L mess, improper stock option accounting, Junk Bond issuance, complex derivatives and now high frequency trading of stocks to goose the underlying derivatives which make option manipulation look like child’s play when the derivatives are in foreign markets and react to US market moves which are hyped to pimp these offshore investment vehicles with little or no domestic visibility. Derivatives of derivatives aren’t new. It’s the ability to trade n-deep derivative trees in various markets while the SEC is looking for the next Duke Brothers trying to get the advance read on domestic Orange Juice crop.
posted by: perturbed | September 23, 2011 8:39pm
The “purpose” of hedge funds, SteveHC (aka “NOW What?”), is to enrich hedge fund managers. Any incidental service they provide in enhancing market efficiency—at the expense of foolish rich investors—is certainly not their “purpose”.
Do most of them still charge “two and twenty”? That’s a 2% (!) management fee plus 20% (!!!) of the fund’s returns.
And then many of them find a way to keep that income taxed at the 15% long term capital gains tax rate instead of the 35% income tax rate.
Nice “purpose”.
—perturbed
posted by: Disgruntled | September 24, 2011 8:14am
2% & 20% was the old standard. Fees are much higher now.Riskless graft that serves to enhance real estate values in places like Greenwich.
Pension funds with YOUR money are part of the problem. They are REGULATED so as to protect capital but the managers have used “hedge funds” to invest in the garbage that our markets are full of.Few pensioners bother to dig deep enough to discover where there retirement money is really being invested.
posted by: Disgruntled | September 24, 2011 8:51am
On the theme of too much regulation…it looks like Mr.Etsy (Haddam land swap) is a devoute follower of The Nutmeg King.Another GREAT appointment who will serve the best interests of Connecticut residents:
http://www.courant.com/news/politics/hc-lender-column-esty-nu-0925-20110923,0,1168083.column
posted by: redman | September 24, 2011 9:19am
I fail to understand why no one talks about jobs being sent out of the country. The last politician to mention this was Ross Perot 20 years ago. His fears have come true. It’s not just manufacturing jobs, either. Dell computers has 30,000 workers in India doing IT work. They don’t pay income tax and they don’t buy our goods and services, a double hit on the economy.
posted by: GoatBoyPHD | September 24, 2011 11:33am
One other post on hedge funds:
It was once unthinkable that Wall Street wouldn’t be the finanical center of the world. With the amount of US corporate money being held overseas and the combined Asian stock markets the size of the Nasdaq, there’s little reason to believe Wall Street will be Wall Street in 2020 as the Asian Century gains momentum and hits critical mass.
posted by: GoatBoyPHD | September 24, 2011 11:45am
@Redman,
Donald Trump was thie generation’s Ross Perot. He may commit yet (I doubt it). He’s got that whole anti-China trade protection thing going on and America is the laughing stock of the world plays well with many. He’s also a great citic of the US government’s domestic programs and particularly job creation.
Perot promised a better government and that’s one area Trump is a little weak. Too libertarian.
Democrats OTOH are really short on the vision thing. “No Public Sector Layoffs” is a fairly pathetic vision and throwing a little or a lot more money to preserve the status que or the type of Rube Golderg designed compromise contraption as Obamcare that leaves even the most ardent universal health care supporters undecided about supporting or opposing Obamacare. At what price are overly expensive marginal improvements detrimental to the cause and creating another generation of cyncics? The Alex P Keatons (the old Michael J Fox Young Republican sitcom character) are in vogue again in student elections 
.
posted by: Disgruntled | September 24, 2011 12:20pm
One wonders if Dan,“the former prosecutor”, was a believer in reguulation?
When he was mayor he must have forgotten about regulation…we know his history going way back with failed S&L’s and bad loans. A review of Stamford based CENDANT and bad-boy Walter Forbes would be a good reason to at least entertain thoughts of regulation.
The markets/world has changed dramatically and we need ANY sort of financial regulation more than ever after Reagan and Clinton did away with pretty much all oversight.
posted by: saramerica | September 24, 2011 11:52pm
GoatBoy just made my day by referencing one of my favorite movies of all time…with cameo by a now Senator of the United States as train conductor.
posted by: Disgruntled | October 4, 2011 9:14pm
A few more unemployed…who cares?
While Dan sucks up to what some might consider a rather corrupt industry,how will these folks pay their taxes and their new train fares?
In typical CT fashion the writer boasts about size,but not quality.
http://www.stamfordadvocate.com/news/article/BNY-to-takeover-Bridgewater-s-back-office-2202086.php