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Wednesday, September 26, 2012

Evita Christie? How Fining Leakers Shows Fear

New Jersey Governor Chris Christie last week conditionally vetoed a state budget measure and suggested that the bill be resubmitted with the revision of the institution of a $10,000 fine on any person found to have released state tax data without proper authorization.  Chris Christie has unwittingly and shockingly taken a page out of the playbook of Argentina's current President, Christina Fernandez.

As the finance news press has only recently begun to report, Fernandez's Argentinian federal government fines economists up to $107,000 for publicly disagreeing with economic data released by the government. Fudging economic data -- or trying to suppress its release -- destroys confidence in any government-released data and will encourage capital to flee to more transparent locales.  My sources tell me that Argentina's capital class has already been moving capital out of that country and investing in hard assets abroad.

The Argentinian example is a cautionary tale for American legislators and state and local leaders, as well as for investors in public utility or state or local bond offerings. The flow of verifiable, credible financial information will be discouraged -- and this is the intent -- by such repressive moves as punitive fines.  More troubling is the signal from such policies that the government ought not to be trusted with its released figures.  It is one thing for Americans to question the methodology of the federal government's labor statistics.  It is quite another for Americans, and particularly the investing community, to openly question the genuineness of reported data, but this circumstance is now sure to happen.

 How an ostensibly conservative Governor (Conservative? Are you kidding me?) could propose this with a straight face or sound mind is, well, mindboggling.

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