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Newt Gingrich Pushing Bill To Allow States To File Bankruptcy Allowing Them To Renege/Pensions...
Zero Hedge ^ | 10 Jan 2011 | Tyler Durden

Posted on 01/10/2011 8:48:41 AM PST by combat_boots

Edited on 01/10/2011 9:20:25 AM PST by Admin Moderator. [history]

Newt Gingrich Pushing Bill To Allow States To File Bankruptcy Allowing Them To Renege On Pension And Benefit Obligations

Tyler Durden's picture
Submitted by Tyler Durden on 01/10/2011 09:48 -0500



Some unpleasant news for pensioned workers who believe that their insolvent state will be able to afford ridiculous legacy pensions in perpetuity. According to Pensions and Investment magazines, Newt Gingrich is pushing for legislation that will allow insolvent states to be taken off bailout support and file bankruptcy, in the process allowing them to renege on pension and other benefit obligations promises to state workers.

And if there is anything that will get government workers' blood pressure to critical levels, it is the threat that money they had taken for granted is about to be lifted, courtesy of living in an insolvent state (pretty much all of them). And obviously what this means for equity investors in assorted muni investments is that a complete wipe out is becoming a possibility, as Meredith Whitney's prediction, which everyone was quick to mock and ridicule, is about to come back with a vengeance.

From P&I:



TOPICS: News/Current Events
KEYWORDS: ira; pension
Cross-links in article.
1 posted on 01/10/2011 8:48:51 AM PST by combat_boots
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To: combat_boots
The Feds will never allow states to declare bankruptcy.

Now that the Feds are in charge of student loans, student loans are the ONLY debt you cannot escape through personal bankruptcy.

Debt is control, and the federal government is all about control.

2 posted on 01/10/2011 8:51:19 AM PST by E. Pluribus Unum ('If they bring a knife to the fight, we bring a gun." -- Barry Soetoro, June 11, 2008)
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To: Admin Moderator

Is there a way to put the entire article title on in the page header somehow? Also, would you please make a new line after “And Benefit Obligations.”

(The article starts with) “Some unpleasant...”

Apologies. I messed up.


3 posted on 01/10/2011 8:53:23 AM PST by combat_boots (The Lion of Judah cometh. Hallelujah. Gloria Patri, Filio et Spiritui Sancto.)
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To: E. Pluribus Unum
Make that any federal debt

Mike

4 posted on 01/10/2011 8:54:36 AM PST by MichaelP (It's the end of the world as they know it, and I'm so glad!)
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To: E. Pluribus Unum
Now that the Feds are in charge of student loans, student loans are the ONLY debt you cannot escape through personal bankruptcy.

However, someone could pay off thier student loans with a credit card and then file for bankruptcy.........just sayin......

5 posted on 01/10/2011 8:54:53 AM PST by TaxPayer2000 (The United States shall guarantee to every state in this union a republican form of government,)
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To: combat_boots

We’ll screw the pensioners the old fashioned way, inflate their benefits to nothing.


6 posted on 01/10/2011 8:57:03 AM PST by DManA
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To: combat_boots

Uhmmmm.......Hey Newt, judges rule over bankruptcy proceedings. Every AFSCME or similar public worker will be made whole on their pensions, while the private sector workers will have to pay the bill.


7 posted on 01/10/2011 8:58:15 AM PST by blackdog
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To: combat_boots

So, the lesson here is, if it’s OK for governments to default it’s OK for everyone. EVERYBODY run out and get your butt in debt and then just stop paying. The governments do it. Why not.

What BS!


8 posted on 01/10/2011 8:58:21 AM PST by Lee'sGhost (Johnny Rico picked the wrong girl!)
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To: combat_boots

Bankruptcy is going to be the only thing states can do. The Fed cannot bail out states. Bernackie was quizzed on this last week and he stated that the Fed can only give short term money to states, but would not be able to do what they did with the private sector bailouts.

These states are screwed if they thing they can rely on the Federal Gov’t for cover in dealing with these pensions. They will have to be eliminated if the states are going to survive.


9 posted on 01/10/2011 9:01:11 AM PST by Lazlo in PA (Now living in a newly minted Red State.)
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To: TaxPayer2000
However, someone could pay off thier student loans with a credit card and then file for bankruptcy.........just sayin......

I was going to say that Citi is not that dumb, but...

10 posted on 01/10/2011 9:04:16 AM PST by E. Pluribus Unum ('If they bring a knife to the fight, we bring a gun." -- Barry Soetoro, June 11, 2008)
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To: combat_boots

This is excellent news and should be done. The only question is will it happen before or after Illinois and Califonia reach the point of insolvency?


11 posted on 01/10/2011 9:09:17 AM PST by MSF BU (YR'S Please Support our troops: JOIN THEM!)
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To: E. Pluribus Unum; TaxPayer2000
someone could pay off thier student loans with a credit card and then file for bankruptcy.........just sayin......

Can't do that either - credit card debt can't be easily ditched through bankruptcy any more.

12 posted on 01/10/2011 9:09:24 AM PST by no-s (B.L.O.A.T. and every day...because some day soon they won't be making any more...for you.)
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To: blackdog

Actually, as a practical matter, when the state or local treasury has nothing left, then they can’t issue checks. It’s is certainly within the realm of possiblity that many folks retired on a state/local system could see reduced checks regardless of that the law says. If there is no money, then there is NO MONEY. Bernake just made clear this morning that the Fed won’t be bailing these entities out either, they’re on their own.


13 posted on 01/10/2011 9:13:12 AM PST by MSF BU (YR'S Please Support our troops: JOIN THEM!)
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To: E. Pluribus Unum; combat_boots
The Feds will never allow states to declare bankruptcy.

I don't know about Illinois, but California has an out if the state gov't leadership and Attorney General dares it. The state retains the option ( in state law, preempts any contract provision to the contrary) to renege on contracts based on fraudulent statements or tainted by conflict of interest.

IMHO, almost every bond issue, every pension obligation, etc taken on in recent years could potentially fall under that umbrella. The incestuous nature of state politics almost completely insures there a skeletons in every single closet (heheh). Of course it might hit too close to home for some politicians currently in office...

14 posted on 01/10/2011 9:23:12 AM PST by no-s (B.L.O.A.T. and every day...because some day soon they won't be making any more...for you.)
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To: combat_boots

And Newt of course will renounce his retirement pay from the US Congress I assume? After all, the us government is broke,, no, they would actually need several trillion before they can even be ‘ broke’.

Show us how its done global warming sofa boy.


15 posted on 01/10/2011 9:24:00 AM PST by DesertRhino (I was standing with a rifle, waiting for soviet paratroopers, but communists just ran for office)
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To: no-s

Back in the housing bubble people knew that getting out from under their student loans by a second mortgage would be a great thing if they thought they were going to default eventually.


16 posted on 01/10/2011 9:24:26 AM PST by Abathar (Proudly posting without reading the article carefully since 2004)
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To: no-s
I appreciate and agree with the sentiment, but nobody in California state government will ever admit to wrongdoing.
17 posted on 01/10/2011 9:26:30 AM PST by E. Pluribus Unum ('If they bring a knife to the fight, we bring a gun." -- Barry Soetoro, June 11, 2008)
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To: combat_boots

The title won’t fit in the field for it, it’s too long
We cleaned the post and title up a bit


18 posted on 01/10/2011 9:33:11 AM PST by Admin Moderator
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To: combat_boots
I'm not sure this is the best of ideas. The states will reach a point of insolvency first which will put them in a permanent semi-vegitative state. It would suck because the unions will get theirs and everyone else be damned but it would be the crippling of many “blue” states.

I am afraid bankruptcy would just clear the slate for another round of Ponzi schemes that would benefit the liberals.

Most importantly we immediately need laws preventing any taxpayer bailouts.

19 posted on 01/10/2011 9:35:44 AM PST by FreedomNotSafety
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To: combat_boots

Only if California, Illinois, New York, and Mass are excluded. They deserve the debt tidal wave they have coming.


20 posted on 01/10/2011 9:43:19 AM PST by Azeem (The world will look up and shout "Save us!"... And I'll whisper "No.")
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To: Admin Moderator

Kewl. Tyler’s icon, big font and everything!

Thanks!


21 posted on 01/10/2011 9:44:47 AM PST by combat_boots (The Lion of Judah cometh. Hallelujah. Gloria Patri, Filio et Spiritui Sancto.)
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To: combat_boots
The newly-elected Dim governor of union-controlled Illinois has proposed, among other brain-tics, a gigantic hike in cigarette taxes plus 75% state income tax increase....and he's blessed with a Dim-controlled legislature.

Pension problem (for the unions) solved by Gov. Quinn.

Leni

22 posted on 01/10/2011 9:45:08 AM PST by MinuteGal
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I understand why states may want/need to file bankruptcy. What I don’t understand is what will happen to all the employees’ pensions. Do you just leave people who’ve done no wrong, worked 20-30 years, and thought they had a pension, do you leave them penniless? Will they be paid x cents on the dollar?

Would be better, or even feasible, to ask employees and retirees if they would take x cents on the dollar rather than have the whole state go bankrupt and they lose it all? Are the ‘cram down’ provisions available in business bankruptcies available if the state goes belly up, so that the state can force a settlement on the retirees?


23 posted on 01/10/2011 9:51:32 AM PST by radiohead (Buy ammo, get your kids out of government schools, pray for the Republic.)
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To: blackdog

>Every AFSCME or similar public worker will be made whole on their pensions,

Thats not true.
While judges do rule, they still have to follow the bankruptcy framework and they cannot order anyone to pay anything that is not already there in the current asset list.

Only secured creditors get a shot at 100% and pensions are not secured anything.
The rest would be lucky to get 10%, and typically it is much less.


24 posted on 01/10/2011 9:53:18 AM PST by bill1952 (Choice is an illusion created between those with power - and those without)
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To: bill1952

You mean like General Motors?


25 posted on 01/10/2011 9:56:03 AM PST by blackdog
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To: combat_boots

Going bankrupt is better than a bail-out and if they go bankrupt they should be prohibited from ever offering a benefit that is unsustainable and pretty much any other Progressive program :)


26 posted on 01/10/2011 9:56:17 AM PST by surfer (To err is human, to really foul things up takes a Democrat, don't expect the GOP to have the answer!)
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To: MinuteGal
I like it! Let's let these idiots see this through to its natural conclusion. Think Detroit and its large swaths of depopulated urban jungle. Think Youngstown were every year a little more city is plowed under and allowed to revert to meadows and forest. Think California were hardworking, law abiding taxpayers are being replaced with hardworking, lawless (not that most of CAs laws are worth following), underground wage earners.
27 posted on 01/10/2011 9:56:17 AM PST by FreedomNotSafety
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To: radiohead

>Do you just leave people who’ve done no wrong, worked 20-30 years, and thought they had a pension, do you leave them penniless?

No. They get Social Security, just like the taxpayers who work all of their lives and foot the bill for those public pensions.


28 posted on 01/10/2011 9:57:41 AM PST by bill1952 (Choice is an illusion created between those with power - and those without)
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To: combat_boots

You’re welcome
You can do that too, just get the source and post it.


29 posted on 01/10/2011 10:00:26 AM PST by Admin Moderator
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To: blackdog

That had nothing to do with the courts - TARP rescued them.


30 posted on 01/10/2011 10:01:09 AM PST by bill1952 (Choice is an illusion created between those with power - and those without)
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To: bill1952
That is a good point. The UAW was made whole by the US government, presidential branch, not the bankruptcy courts.

At the state level the unions wont have, hopefully, a sugar daddy.

So I would support bankruptcy if tied to a law preventing bailouts.

Have you noticed the union pension plans are trying to become secured creditors? Why is that? I think it is because that would require some real math to calculate exactly how much money would be required to fund their benefits. The amount would be so high that taxpayers would finally revolt once and for all. Better for them to stay ambiguous and hope to dominate the political process.

31 posted on 01/10/2011 10:03:10 AM PST by FreedomNotSafety
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To: combat_boots
Can this be the same guy who made his bones back in 1994 with the conservative "Contract With America"?

Obviously old Newt picked up more from Nancy Pelosi than a Global Warming sofa photo-op when he shared the couch with her back in 2008.

Did she give him some special leftist one-on-one back in the congressional cloakroom after the photo-op?


32 posted on 01/10/2011 10:03:14 AM PST by Iron Munro (When a society loses its memory, it descends inevitably into dementia - Mark Steyn)
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To: combat_boots

Awwwwwwww the poor government workers will have tho *SHOCK* work the same as the rest of us lowly peons???

I worked as a contractor for the state govt - it was the most lazy, inneficient, stupid, backstabbing, corrupt, idiotic place I ever worked.

they could easily have done twice the work with half the people.


33 posted on 01/10/2011 10:10:22 AM PST by Mr. K
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To: bill1952

>Do you just leave people who’ve done no wrong, worked 20-30 years, and thought they had a pension, do you leave them penniless?

No. They get Social Security, just like the taxpayers who work all of their lives and foot the bill for those public pensions.

Thank God they will not do this. The people who worked in the private sector making tons of money had every opportunity to work for the government except for those who have a felony which could be why most here bash the government. Sorry folks you can’t have a felony and work for the government. Anyway you can hope and pray that the pensions are just going to vanish but they won’t. Why we discuss this all the time is humorous. I guess it gives the wealthy civilians something to talk about. The reason that things are going haywire right now is because the stupid baby boomers are ruining EVERYTHING but that is nothing new. This generation SUCKS bad. Notice this talk of overblown pensions are starting now that the baby boomers are retiring with big huge pensions. Well the generation after them does not have the same pension plan at all but they are stuck with the same reputation. Totally stupid people never get that message.


34 posted on 01/10/2011 10:18:56 AM PST by napscoordinator
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To: bill1952
The why can a state judge rule that a school district which has no money has to give teachers raises or increases in spending for similar purposes must do so via court order?

New Jersey and California judges do it quite frequently.

35 posted on 01/10/2011 10:41:41 AM PST by blackdog
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To: napscoordinator
You can't have a felony and work for the government???

Huh?

For some it's a prerequisite. For others it's a life long achievment award.

36 posted on 01/10/2011 10:44:37 AM PST by blackdog
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To: radiohead

You raise interesting questions, but the comparisons you use are not quite equivalent. In a cramdown bankruptcy, which is an involuntary filing..i.e. one that is forced by creditors, (and not a voluntary filing, when the company gets to continue operating at it files the plan with the court)..and just about always leads to a liquidation..all the assets are gathered, and then the creditors get in line according to their position as determined by law, and the pie is split...senior bondholders are paid off in full..IN any state reorganization..you can’t have a cramdown..because that would negate an election..so the elected officials, who generally caused the problem..would have to come up with the solution..and there they will have to decide who gets what. Also, the state has no assets per se...other than the power to tax...unless we experience the greatest privatization ever..i.e. California selling off the Golden Gate Bridge..If bondholders are stiffed..then the state will never be able to borrow again at reasonable rates..Ultimately, it will be multiple levels of pain.. existing retirees will have to take substantial haircuts on pensions and medical benefits..current employees will have to take cuts in current pay levels..and future contractual benefits will ahve to be substantially reduced..as will the number of current municipal employees..and then bondholders will take a haircut...


37 posted on 01/10/2011 10:51:21 AM PST by ken5050 (I don't need sex.....the government screws me every day..)
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To: blackdog

from 11 usc 109 on municipalities being a debtor:

(c) An entity may be a debtor under chapter 9 of this title if
and only if such entity -
(1) is a municipality;
(2) is specifically authorized, in its capacity as a
municipality or by name, to be a debtor under such chapter by
State law, or by a governmental officer or organization empowered
by State law to authorize such entity to be a debtor under such
chapter;
(3) is insolvent;
(4) desires to effect a plan to adjust such debts; and
(5)(A) has obtained the agreement of creditors holding at least
a majority in amount of the claims of each class that such entity
intends to impair under a plan in a case under such chapter;
(B) has negotiated in good faith with creditors and has failed
to obtain the agreement of creditors holding at least a majority
in amount of the claims of each class that such entity intends to
impair under a plan in a case under such chapter;
(C) is unable to negotiate with creditors because such
negotiation is impracticable; or
(D) reasonably believes that a creditor may attempt to obtain a
transfer that is avoidable under section 547 of this title.


38 posted on 01/10/2011 10:51:44 AM PST by longtermmemmory (VOTE! http://www.senate.gov and http://www.house.gov)
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To: napscoordinator
Anyway you can hope and pray that the pensions are just going to vanish but they won’t.

They will vanish when the money runs out and not before. This will be true for all of us, whether you have a govt, corp, or personal retirement plan. You think anyone is safe with our own retirement plan in stocks and bonds?
39 posted on 01/10/2011 10:52:02 AM PST by PeterPrinciple ( Seeking the truth here folks.)
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To: ken5050

chapter 9 specifically precludes much of that.


40 posted on 01/10/2011 10:55:19 AM PST by longtermmemmory (VOTE! http://www.senate.gov and http://www.house.gov)
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To: TaxPayer2000

you are not just saying because peole were doing. Hence the credit card companies mad dash to reduce credit to the peons.

debit cards are best for the logo creidits because they still chage for the use, chage for the atm fees, and NOW they are going to start to charge an annual fee for using YOUR OWN MONEY. (so VISA will charge the merchant and charge the consumer for using their card. In some places now they don’t even take cash)


41 posted on 01/10/2011 11:08:35 AM PST by longtermmemmory (VOTE! http://www.senate.gov and http://www.house.gov)
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To: Lee'sGhost

no this is about revenue streams and chapter 9. Not 11 or 7.

You also are not taking into account the rampant corruption and fraud in union contracts.


42 posted on 01/10/2011 11:17:27 AM PST by longtermmemmory (VOTE! http://www.senate.gov and http://www.house.gov)
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To: FreedomNotSafety

proof reading is good, insert: Unions are NOT asking to become secure creditors.


43 posted on 01/10/2011 11:24:35 AM PST by FreedomNotSafety
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To: MSF BU
"This is excellent news and should be done."

Easy for you to say.

That's my 92 year old Mother's pension from a lifetime of teaching in IL you are taking about there.

44 posted on 01/10/2011 11:59:14 AM PST by M. Dodge Thomas
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To: combat_boots

We need Union Busters, like the old Trust Busters. They are a criminal cartel.


45 posted on 01/10/2011 12:40:05 PM PST by UnwashedPeasant (Don't nuke me, bro)
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To: combat_boots
Personally, I found the original article on the Pensions and Investments web site to be much more interesting than Mr. Durden's excerpt with comments.

I've noticed this a lot lately. Go to a Fox News story only to discover they have excerpted an article from somewhere else and stuck their comments on it. Are the journalists getting lazy?

46 posted on 01/10/2011 12:58:26 PM PST by upchuck (When excerpting please use the entire 300 words we are allowed. No more one or two sentence posts!)
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To: M. Dodge Thomas

Tell you what, the real solutions will probably involve caps. Overall pension payouts may be capped at 30K? 50K? You tell me. COLA may be capped at 4% per annum? Only occur once every two years? The numbers may change. I think we can both agree that before any pensions get cut we freeze public hiring and public wages, to include step increases...forget about it. Also, funding for frivolous nonsense goes away: Arts, Humanities, Departments of Croatian American Studies...all gone. Maybe a few state and community educational institutions as well: retain science, medicine, business, etc.


47 posted on 01/10/2011 5:43:56 PM PST by MSF BU (YR'S Please Support our troops: JOIN THEM!)
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