Newt Gingrich Pushing Bill To Allow States To File Bankruptcy Allowing Them To Renege/Pensions...

Zero Hedge ^ | 10 Jan 2011 | Tyler Durden

[combat_boots]

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

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:

[combat_boots]

Cross-links in article.

[E. Pluribus Unum]

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.

[combat_boots]

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.

[MichaelP]

Make that any federal debt

Mike

[TaxPayer2000]

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......

[DManA]

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

[blackdog]

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.

[Lee'sGhost]

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!

[Lazlo in PA]

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.

[E. Pluribus Unum]

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...

[MSF BU]

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?

[no-s]

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.

[MSF BU]

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.

[no-s]

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...

[DesertRhino]

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.

[Abathar]

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.

[E. Pluribus Unum]

I appreciate and agree with the sentiment, but nobody in California state government will ever admit to wrongdoing.

[Admin Moderator]

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

[FreedomNotSafety]

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.

[Azeem]

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