As part of his initiative to make state government more efficient, New Jersey Governor, and former chief of Goldman Sachs, John Corzine is is looking to mandate competition for almost all goods and services that are purchases.

But, there is one exception, municipal bonds….You know, where companies like Goldman Sachs make an awful lot of money managing the sales of these instruments, and competitive bidding does save money:

Competitive bond offerings force banks to line up on an advertised day and submit the lowest interest-cost bid to win underwriting business. In a negotiated sale, states and cities decide in advance which banks will market the bonds. Underwriters have promoted the no-bid method, saying it allows them to get the best prices for issuers by tailoring the debt to specific types of investors.

Bid sales saved issuers 17 to 48 basis points, “on average and all else equal,” according to a study published in the Winter 2008 issue of the Municipal Finance Journal. A basis point is 0.01 percentage point. On $100 million of debt, the savings mean $1.7 million to $4.8 million less interest over the life of a 10-year bond.

I guess that his buddies at Goldman Sachs are suffering under the restrictions Obama has placed on executive compensation.