Some of the highest taxes in the nation and a culture of corruption that puts the Mafia to shame have made living in New Jersey unappealing to anyone with a little money in the bank. The only reason the state doesn’t empty out faster than it does now is the fact that it is somewhat cheaper to live there than within New York City if you work in New York, and Jersey has a very efficient public transportation system to get people from Jersey to New York.

However, with the coming collapse of Commercial Real Estate, which is already affecting the NYC economy, the days of New Jersey benefiting from being a de facto suburb of Manhattan are pretty much over. Struggling to make up revenue to cover the loss of taxpayers to states where you can stretch a buck (like South Carolina, or as I like to call it now, “Little Jersey”) the panicky Jersey Democrats are floating a novel idea. They plan on buying “troubled” loans and securities because of the relatively high payout possible. If this sounds like it is a re-enactment of the subprime mortgage crisis that’s because it is.

New Jersey’s beleaguered pension fund would buy troubled loans and securities – so-called “toxic assets” – as part of a Wall Street recovery plan discussed Friday with the head of the Federal Deposit Insurance Fund.

Bill Clark, director of the state’s Division of Investment, was among officials from at least 15 states who discussed the proposal with FDIC chairwoman Sheila Bair on Friday.

Present at the midday meeting were pension officials from New York City, New York State and Connecticut, said Orin Kramer, chairman of the New Jersey State Investment Council, who helped coordinate the meeting.

Representatives of 12 other states, including Pennsylvania, California and Florida, participated in the meeting by phone, Kramer said.

The states are interested in investing in the Public-Private Investment Program for Legacy Assets, believing it could provide a good return on investment, Kramer said. Bair is open to the idea, but the details need to be worked out, Kramer said.

The program, unveiled by the U.S. Treasury on Mar. 23, would provide federal funding to form public-private partnerships that would buy up so called “legacy assets,” including commercial and residential mortgages and securities. The intent is to reduce the bad assets on the balance sheets of banks, and free them to lend more.

Kramer said Governor Corzine believes the program could provide a lucrative opportunity for New Jersey’s pension fund, which has been battered in recent months by the general problems in the financial markets.

In a statement, Corzine’s spokesman Robert Corrales said the meeting was a “good opportunity” for federal officials and states to develop a plan to involve pension funds “without having to accept the traditional fee structure charged by private sector managers to invest in these types of assets.”

I’m sure. It seems to me the phrase “good opportunity” is code for the “desperate gamble” that Corzine is taking because New Jersey is quickly approaching a point where it won’t be able to meet the outrageous pension obligations the corrupt unions forced upon my former home state without ever looking forward and thinking about whether their demands were feasible in the long term.The legacy costs penalize the average citizen to such an extent that a 2007 newspaper poll found that half of all respondents wanted to leave the state.

The recession gutted the monies Jersey was using to pay off pension liabilities that are crippling the economy, but the process of insolvency was only sped up by the stock market collapse. Eileen Norcross at Neighborhood Effects explains how badly Jersey’s elite screwed this state bankrupting pooch:

New Jersey’s pension has been in crisis for awhile, in part because the market has fallen, and in part because of fiscal manipulation and abuse.

The state has bonded to pay for it, deferred contributions for several years and played with the valuation rules to get the books to balance — all while expanding benefits. Grantees have also exploited the system, using gimmicks to increase the size of their pensions such as tacking on multiple jobs, boosting base salaries, and getting benefits for part-time work.

In essence, Jersey is short at least eighty billion dollars. That explains the gambling urge, but what’s more telling is that rather than seek a different solution, Jersey and a bunch of other states are basically going to do the exact same thing that ended up collapsing financial companies. Who then is going to bail them out?

No matter how hot the Fed runs their printing presses, there is no way they can fix this problem when it blows up in Jersey’s face. I used to say I would never set foot in New Jersey again, but now I’m not so sure. Ten years from now maybe I’ll visit the post-collapse Jersey, where tribes of former state employees where live in teepees burning their old pension checks for heat. I’ll make a trip there to trade beads and glitter with them. Those things will be worth more than any promissory notes from Corzine and the Democrats.