Longtime readers may have noticed that in recent months I’ve dialed down my griping about the state of Connecticut on this blog.
Because why give away the milk for free! Over at the Yankee Institute, I’ve been turning my criticisms into hard currency with a series of spitballs aimed at Hartford.
Most economists agree that while raising minimum wages benefits a majority of workers, some jobs are lost no matter how small the increase. A paper by a DC think tank duplicated the methodology of a similar Congressional Budget Office study and found that those job losses affect young, unskilled entry-level workers, thereby disproportionately hitting the workforce in already struggling cities like Bridgeport and Hartford. The study suggests that governments can aid low-income workers without jeopardizing any jobs by instead expanding the Earned Income Tax Credit. I didn’t know this when I wrote the piece, but in 2011 Connecticut cut the state EITC to 25 percent of the federal credit, down from 30 percent.
Just last week I wrote about how CT’s Department of Labor mandates that employers report all new hires to the state within 20 days. The state even has a website telling you how to do it: just print out a form and either mail or fax it in. That’s right, unless you’re willing to use the state’s hyper-complicated FTP format, there’s no way to send the information online because the website hasn’t worked for at least three years. Instead you must send a piece of paper to Hartford, where presumably somebody manually punches it into a database. Connecticut — the land of tomorrow!
But my favorite so far has been a piece of investigative journalism in which I reported the state gave $5 million to a Wall Street company to move from White Plains to Stamford. With companies like Aetna and General Electric routinely abandoning Connecticut for more salubrious shores, Malloy’s Department of Economic and Community Development has been throwing corporate welfare at anybody with more than two house elves on the payroll if they’ll move to CT or, if they’re already here, just simply stay put. In this case, the DECD handed out a $1 million grant and a $4 million loan to a company called FSC CT, of which only $1 million had to be paid back.
Except it turns out the guy running FSC CT, Leonard Tannenbaum, was a crook:
In October 2014, Tannenbaum went public with an IPO for Fifth Street Asset Management, a company which in turn invested in two other publicly traded companies he also started, Fifth Street Finance (FSC) and Fifth Street Floating Rate Corp. (FSFR). Both FSC and FSFR were business development companies (BDCs), financial instruments that offer loans to small and mid-sized businesses.
On the eve of the IPO, Tannenbaum owned 94 percent of FSAM, raising the value of his shares to $684 million once it went public.
Yet not long after the IPO, FSC revealed that many of its loans to businesses were considered nonaccrual loans, meaning they couldn’t generate interest because the borrowers hadn’t been paying them back and were in danger of default. On top of that, FSC had been overpaying fees to FSAM.
A bunch of lawsuits and one SEC investigation later, the whole pyramid collapsed, burying at least $2 million of the loan irretrievably. The state will probably never see the $1 million grant again either.
There’s more of my work to come at the Yankee Institute. In the meantime, Yay, Connecticut!