Goldman Sachs (GS) has managed to embroil itself in yet another political controversy. This one involves some interest rate swaps the state of New Jersey purchased in 2003 to hedge against rising interest rates, according to Bloomberg.

The state's transportation trust fund authority sold $345 million in auction-rate bonds whose yields fluctuated with short-term interest costs. The state pays nearly $1 million a month for the insurance. The kicker here is that the bonds were redeemed and replaced with fixed-rate securities, so the state is paying for interest rates protection on bonds that don't exist. That hedging agreement doesn't expire until 2019. So that's a lot of payments.

Lots of entities have paid to exit variable rate bonds. It's unclear what the cash-strapped state can do. Will Gov. Jon Corzine, former big wig at Goldman Sachs, be able to work any magic with his old employer? Would that win him any votes? 

For more:
- here's the article

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