It may have been the most controversial loan ever given out by the state of Connecticut. In May, the state’s bond commission, chaired by Gov. Dannel P. Malloy (D), doled out $22 million to the world’s largest hedge fund, Bridgewater Associates LP. Based in Westport, Connecticut, the firm is worth billions.
The deal included a $5 million grant and $17 million loan to expand in Westport, Wilton, and Norwalk. As part of the arrangement, Bridgewater would not have to pay back the $17 million, if it maintained its 1,400 work force and hired 750 new employees by 2021.
The bond commission vote drew a stinging rebuke from Republicans and the public at large. With Connecticut going through yet another budget crisis, leading to state employee and teacher lay offs, handing out millions of taxpayers dollars – which might not have to be paid back – to a hedge fund that handles $169 billion in assets, did not resonate a positive tone among the state’s taxpayers. The Malloy administration defended the move. Department of Economic and Community Development Commissioner Catherine Smith was quoted in the Hartford Courant: “This is a good boost to the revenue side of the general fund by using bonded dollars. It’s an investment; every nickel we put in, we’re going to get back from this company.”
The logic being that Bridgewater employs people at high salaries and the state would reap the benefits from the income tax and employee spending habits at large. Smith was also quick to remind critics, “if the company doesn’t perform, we have the ability to get our money back.”
Less than two months after the state bonded the money for Bridgewater, comes word that the company may not be hiring. The July 18 edition of the New York Times reports that Bridgewater “is said to be slowing hiring.” Word is the company’s flagship Pure Alpha fund is down 8.8 percent, the endowment for the California state university system has taken out the more than half-billion dollars it invested in Bridgewater, the firm has suspended its recruiting of new employees, and also cancelled scheduled interviews with potential hires. The Times reports that the hedge fund is tight lipped about these developments but notes: “It was unclear whether the suspension of recruiting in some areas was temporary or a reflection of a new push to gradually shrink the size of the firm.”
“Shrink the size of the firm.” That doesn’t sound like hiring 750 new employees to me.
Connecticut has a habit of keeping sketchy information, when doling out millions to companies who promise to hire new employees. You have a better chance of finding out what’s in Hillary Clinton’s emails than getting the state to produce documentation of jobs created by firms getting a taxpayers’ handout. Not to mention that the state has a distorted formula for jobs created. If a firm getting the money, for example, hires an outside landscaping company to do work, it can count it as jobs created.
But the latest New York Times story should serve as a wake up call to Smith and others. It might be a good idea to get that money back now, before it’s too late.