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Governor Murphy’s “Crazy Eddie” Borrowing Scheme

the staff of the Ridgewood blog

River Vale NJ, Assemblywomen Holly Schepisi ,”Only in New Jersey could we increase spending by BILLIONS, borrow BILLIONS in dollars because we allegedly can’t pay our increased spending, increase the gas tax during a pandemic to the fourth highest gas tax in the nation, cut programs like mental health services for at risk youth (a program that has been in place since the 1980s and has assisted children with mental health, employment, pregnancy prevention, drug abuse education and more) and then announce a program to give free cash starting next year to anyone who gives birth.
It is the equivalent of paying for your neighbor’s HULU account so they can watch Handmaid’s Tale while your own home is in foreclosure. The State of NJ is proposing to borrow money at a cost of $80 million in interest payments to the tax payers in this State in order to issue free “Baby Bonds” that will yield only a 1.35% return over 18 years or an approximate total of $21.6 million in interest. How does this make any sense whatsoever?”

Governor Murphy has been aggressively promoting his brand newborn “baby bond” proposal to give $1,000 to every child born in New Jersey to a family under a certain income threshold.

Senator Jim Holzapfel and Assemblyman Greg McGuckin and John Catalano are once again blasting Governor Murphy’s proposal to give a $1,000 saving bond for every New Jersey infant born into qualifying families next year.  The proposal is under scrutiny by the 10th District Legislators who are calling this plan a complete waste of taxpayer dollars and a political move by the Governor to ensure his victory in the 2021 election.

“Instead of properly funding our schools or helping our small businesses and restaurants, the Governor is choosing to spend $80 million a year to give newborns a savings bond,” Senator Holzapfel said.  “Our state is facing one of the most challenging economic times in history and the Governor thinks that ‘Baby Bonds’ is an appropriate proposal for our deteriorating economy.   We are sick of his excessive borrowing schemes to fund these outrageous ideas in order to ensure his re-election next year.”

State Senator Mike Testa says ” While Governor Murphy “claims” he needs to borrow BILLIONS of dollars to prevent layoffs and fund property tax relief programs, consider the following things in this year’s budget that the borrowing will really support:

Increasing the surplus by $1 BILLON, which is money that will be left in the bank and spent next year
Increasing prefunding of future pensions by $1BILLION, which is money that will be put in a bank and spent decades from now
Offsetting intentionally overstated revenue losses by $2 BILLION, which will provide him an extra $2 BILLION to spend when revenues come in better than projected – as they will”

The math just doesn’t add up..

Governor Murphy’s push to borrow money to make payments on borrowed money reminds many old timers of former retail icon “Crazy Eddie”.

Crazy Eddie was a consumer electronics chain in the Northeastern United States. The chain was started in 1971 in Brooklyn, New York, by businessmen Eddie and Sam M. Antar, and was previously named ERS Electronics (ERS stood for Eddie, Rose and Sam; Rose and Sam were Eddie’s parents). The chain rose to prominence throughout the Tri-State Region as much for its prices as for its memorable radio and television commercials, featuring a frenetic, “crazy” character played by radio DJ Jerry Carroll (who copied most of his shtick from early TV-commercial pioneer, used car and electronics salesman Earl “Madman” Muntz). At its peak, Crazy Eddie had 43 stores in four states and reported more than $300 million in sales.

The key to Crazy Eddie’s success was what is often referred to as the “inventory float “, Eddie would run huge promotional sales and then pay vendors as late as possible , reordering new merchandise in the meantime . Do to the huge volumes of sales vendors would give Eddie a long leash and easy credit . The buy now pay later ,stretched into a huge pyramid. Unable to sustain the pyramid scheme , co-founder Eddie Antar cashed in millions of dollars’ worth of stock and resigned from the company in December 1986. Crazy Eddie’s board of directors approved the sale of the company in November 1987. The entire Antar family was immediately removed from the business. The new owners quickly discovered the true extent of the Antar family’s fraud, but were unable to turn around Crazy Eddie’s quickly declining fortunes. In 1989, the company declared bankruptcy and was liquidated.

In February 1987, the United States Attorney’s Office for the District of New Jersey commenced a federal grand jury investigation into the financial activities of Crazy Eddie. In September of that year, the United States Securities and Exchange Commission initiated an investigation into alleged violations of federal securities laws by certain Crazy Eddie officers and employees. Eddie Antar was eventually charged with a series of crimes. Antar fled to Israel in February 1990, but was returned to the United States in January 1993 to stand trial. His 1993 conviction on fraud charges was overturned, but he eventually pleaded guilty in 1996. In 1997, Antar was sentenced to eight years in prison and was subject to numerous fines. He was released from prison in 1999.

For years on Wall Street this trading on the “float ” form of financing became known as pulling a “Crazy Eddie” . Trading on the float would often be coupled with inflating inventory . Firms would mark up values before inventory and mark them down right after .  Famous practitioners of this style of intory manipulation  were firms like Phar-Mor from Youngstown Ohio and Duane Reade from New York City.

One thought on “Governor Murphy’s “Crazy Eddie” Borrowing Scheme

  1. For this douchbag its just another “LBO'” (leveraged buyout)
    Borrow money, get your fees, mortgage the shit out of it, stuff it up the investors ass with an IPO while you and your private equity buddies cash out and hit the road before it implodes and goes bankrupt.
    The only difference is the LBO employees lose it all.
    In NJ, the greedy union pensioners will continue to bleed the state treasury dry with cadillac health care plans, early retirements , while moving to a southern state that doesnt tax their check.

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