"I'm worried about the state budget, the state economy in the context of the very dramatic restructuring that is taking place on Wall Street," Corzine said Monday morning during an appearance in Ewing Township. "The northern half of the state, there are many, many people who are involved with that industry. That's one of the reasons you have high levels of income in the state."
Corzine, the former co-chairman of Goldman Sachs, worries about significant job losses.
"Both Lehman and Merrill have substantial operations in the state," he said. "And any time you have a bankruptcy, you have to worry that there are going to be closures, and people will lose their jobs."
Recalling the Drexel Burnham bankruptcy filing in 1990, Corzine said, "those jobs all went away. There was a shrinking of the industry. So the Lehman bankruptcy is not good for the long-run health of jobs for the metropolitan region and I think it will be hurtful."
Donald Scarry, the principal economist at New Jersey Economics, an economic consulting firm, said taxes on capital gains from investments and on big year-end bonuses for Wall Street workers are both key parts of New Jersey's tax base. Both could fall due to Wall Street's problems, he added.
Scarry predicted the impact could spread to industries including construction and auto dealerships, which fill their showrooms and lots with cars purchased using inventory loans, whose rates may rise.
Hoboken Mayor David Roberts said thousands of his city's residents work on Wall Street. He's concerned about the impact of unemployed residents who can no longer make mortgage payments, or spend money in restaurants and bars.
"Having so many young people lose their jobs is certainly cause for concern," he said.
He could not estimate the impact on the city's budget next year.
James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, noted Merrill Lynch may be the largest employer in Mercer County, with a huge complex it moved into in Hopewell Township a few years ago. He estimated that facility has around 6,500 workers.
Joseph Seneca, an economics professor at the Bloustein school, said the merger of Bank of America and Merrill Lynch, both major employers in New Jersey, will lead both companies to eliminate jobs and close or sell some offices. He said the fallout from the latest surprise on Wall Street could include even tighter credit, keeping companies and individuals from being able to borrow.
That is an increasingly serious problem in Atlantic City, the seaside gambling resort that's heavily dependent on financing for expansion projects and paying down massive amounts of debt.
Already, two massive casino-hotel projects have been delayed by the credit crunch; Pinnacle Entertainment and MGM Mirage have put a combined $7 billion worth of Atlantic City projects on hold until credit markets improve.
But the prospect of even tighter financing - not to mention thousands of suddenly unemployed stock brokers and investment bankers - is worrying some here.
"It's adding to an already challenging climate," said Joel Simkins, senior vice president of Macquarie Securities. "Not only is Wall Street an important source of financing for the casinos, but Wall Street is also a good customer of Atlantic City. Traders and investment bankers frequently visit the casinos as guests and spend a good deal of money there as well, so there could be an impact in that regard."
Frank Fantini, publisher of a gambling industry newsletter, said Atlantic City casinos remain fundamentally sound, but will have a harder time finding money to pay down debt. In years gone by, the casinos could borrow money at affordable rates to retire some debt - an option that's off the table right now.
"Casinos are heavily capital intensive; they pretty much all carry a lot of debt and long have lived in a favorable environment where they can refinance debt to lower levels," he said. "Today, as debt matures, or there's some need to refinance, the cost of debt is coming in higher, meaning their future expense base is higher."
---
Associated Press writers Angela Delli Santi in Ewing and Linda A. Johnson in Trenton contributed to this story.
