Susan Bysiewicz -- Economic Illiterate

In 2010, Susan Bysiewicz threw her hat in the ring in the election of a new Attorney General for Connecticut. It did not last long; Bysiewicz was forced out of the race since she did not meet the Constitutional requirement for the Attorney General. The AG must have practiced law in Connecticut for at least 10 years in order to qualify for the office. Somehow, Susan "overlooked" that requirement. After raising money and campaigning for a while, Bysiewicz recognized reality and had to drop out.

This year, Susan is running for the Democrat nomination for the US Senate. Once again, she seems to have no idea what she is doing. Her new "signature" issue is called "Making Wall Street Pay". Susan wants to impose special taxes on stock transactions to "make Wall street pay for wrecking the economy." Think about it. There are three states who depend heavily on Wall Street to fund their governments: New York, New Jersey and, of course, Connecticut. Making Wall Street pay, by taxing it the way Susan wants will reduce income and employment by the financial firms. All that tax revenue that Connecticut collects from the numerous hedge funds in Stamford and Greenwich will be greatly reduced. The taxes paid by the tens of thousands of folks who commute from Fairfield County to lower Manhattan to work in financial services will also collapse. Indeed, unemployment for Connecticut will rise. A city like Stamford that depends on financial services as its only engine for growth will see a serious downturn. That's right, Bysiewicz has a plan designed to punish Wall Street which will torture Connecticut.

That is bad enough, but you need to hear Bysiewicz's reasoning to understand just how economically illiterate she is. Here is what this guru says on her web site: "Walls Street banks committed fraud by selling sub-prime mortgage derivatives at the same time they were betting against those derivatives with credit default swaps." Let me explain why this is wrong: Anyone who is a prudent investor understands the concept of insurance. If a company builds a new plant, it gets fire insurance for that plant. If the plant then burns down, it does not mean that the company committed fraud. It means that the company was careful and took steps to minimize its risk if the worst happened. When Wall Street firms sold mortgage backed securities, they also got credit default swaps in place. These swaps are in the nature of insurance policies on the creditworthiness of the borrowers. It is a prudent and careful policy, not fraud.

Now some of the Wall Street firms were in the market to sell credit default swaps and also to buy others. Just the same way an insurance company sells insurance and then gets re-insurance to cover a part of the risk, what the Wall Street firms did makes perfect sense. The whole point of the trades was to spread the risk around; it is a good think, not a bad one.

Bysiewicz clearly either does not understand this or she is intentionally lying to the people of Connecticut. Personally, I have no reason to believe that Bysiewicz is dishonest. As a result, the only reasonable conclusion is that when it comes to economics and markets, Bysiewicz is a total moron. Either way, however, this is not the kind of person Connecticut needs in the Senate.