Skip to comments.Detroit going for broke (just told its creditors to pound sand)
Posted on 06/16/2013 8:28:40 AM PDT by SeekAndFind
Last month, Ed Morrisey gave us the rundown on the financial status of the Motor City. The prognosis wasn’t good, what with Detroit having billions more in outstanding bills than it could possibly generate in revenue. If anything, that doom and gloom outlook might have still been a bit on the rosy side, as the city’s emergency manager has essentially just told its creditors to pound sand.
A team led by a state-appointed emergency manager said Friday that Detroit is defaulting on about $2.5 billion in unsecured debt and is asking creditors to take about 10 cents on the dollar of what the city owes them.
Kevyn Orr spent two hours with about 180 bond insurers, pension trustees, union representatives and other creditors in a move to avoid what bankruptcy experts have said would be the largest municipal bankruptcy in U.S. history.
Underfunded pension claims likely would get less than the 10 cents on the dollar.
Those pension fund payments and other union / public worker costs are the elephant in the room. While they always merit some sort of mention, a lot of the media coverage of this story seems to try to roll them up as just one of many outstanding items, poor decisions or just plain “bad luck” which is dragging Detroit under. But it’s a lot more than that.
More than 42 percent of Detroit’s 2013 revenue went to required bond, pension, health care and other payments. If the city continues operating the way it did before Orr arrived, those costs would take up nearly 65 percent of city spending by 2017, Orr’s team said.
Kevyn Orr was given just 18 months to clean this mess up and he’s already burned 90 days of that. Everyone seems to agree that there isn’t any room for long term wringing of hands or dancing with the traditional power figures in the city. The house is already on fire, so it’s a bit late in the game to be talking about how many smoke detectors you should have installed. Orr has reportedly told all of the city’s creditors that Detroit is in “a death spiral” and Moody’s has marked down the Motor City’s bonds to below grade level. The unions and other public sector interests can either come to the table for vastly reduced portion of payments or they can stand in the road and allow the entire thing to collapse.
But, assuming Orr finds a path through this tangled mess and returns Detroit to at least the hope of some form of long term solvency, how will they prevent the same thing from happening all over again? Obviously it would require rethinking the entire public service sector, as well as allowing more public scrutiny of everyone who has their fingers in the food dish. More privatization might be part of the answer, but a harsh dose of reality when constructing public service contracts will be mandatory. Otherwise, all Orr is accomplishing is putting a blanket over the flames in the short term and letting the fire build back up all over again.
Emergency manager: Detroit won’t pay $2.5B it owes - CBSNews
HA! Yeah. Right.
RE: I hope that goes for the pensions of the fat, happy Communist bureaucrats who presided over the destruction of that once great city.
I have a very strange feeling that Detroit isn’t going to be the only city doing this when the proverbial s**t hits the fan ( as it eventually will ).
Detroit has no hope of long term solvency. Since anyone with sense has left that place the remaining population has neither the intelligence nor the wherewithal to fund and maintain a modern city. If Detroit were cut off from state and federal money(confiscated from working people outside Detroit) the city would instantly cease to function and would have to be abandoned, its current residents fleeing to areas that are still made inhabitable by people that work.
Unfortunately, there are thousands of towns and cities across America that suffers the same problem as Detroit. It's not bad finances. Its people that can't provide for themselves.
Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded here and there, now and then are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty. This is known as "bad luck."
It’s not bad finances. Its people that can’t provide for themselves.
Is this not the same reason the rats just trashed our entire healthcare system?
Detroit should be forced to start selling city owned assets to pay back the creditors.
1. The 1943 race riots that started when the Packard Motor Company promoted three African-American employees at the plant building Packard Merlin airplane engines drove a lot of white people out of the city.
2. The 1967 race riots that started on a police raid on an illegal nightclub drove even more whites to flee the city.
3. Mayor Coleman Young's poor management and attacks on white-owned businesses drove most of the white out of the city center.
The result is a African-American dominated city that has really no economic viability outside of a few sections like Greektown. An interesting irony is that beyond the Detroit city limits are some of the richest suburbs in the USA.
“Its not bad finances. Its people that cant provide for themselves.”
Yeah, it was a bummer when they designed machines to pick cotton!
This is key...
Most of the Pensions are underfunded to the tune of 40 to 60% so let us use 50%.
So 50% x 10% ='s .05%.
So assume they will get their base 50% + .05% that is a total of 55%.
So if their Pension was to be $2000 per month fully funded, that means it will now be $1100. Big OUCH....
Tangent to this, The Police Pension thinks they are funded up to 90% and many disagree. IMHO what they are afraid of is Orr will come up with one City Unified Pension vs. the Bazillion they have and go with one low cost firm to run it.
Yes the Cops will take it in the Shorts, but Orr is claiming on TV, and yes I saw it with my own eyes That should they go Chapter 9 he will have EVEN MORE POWER.
That is a warning shot IMHO to the Unions, play nice, come to an agreement, or never-mind the haircut you are gonna get a Marine Buzz Cut...
The question is when the Reverend's get involved i.e. Jesse and Al to social justice bla bla bla, their way into the spotlight. However, the last time they should up, no one gave a zit and me thinks their days have come and gone and their wad has been fired...
Buckle up folks, this is gonna be a bumpy ride...
Well fare and corrupt government did not work so well for Rome. It will not work well for us.
Once politicians discovered they could buy votes with government funds it was all over.
Yeah, it was a bummer when they designed machines to pick cotton!
I am not sure where you are going with that statement - the majority who had to pick cotton did not do so voluntarily.
There are no guarantees of success or failure based on race. There are statistical certainties based on culture, education, and opportunities. The political party that freed the slaves allowed the political party that opposed their freedom to make them dependent on government. Ironically, the party that should have been given credit for this has been punished ever since because they changed the law - not the culture. The other party took advantage of the culture that existed for political gain.
History will repeat itself with amnesty -
The GOP should oppose illegal alien labor on the principle of law, but they don’t. They allow themselves to be bought off by a small number of industries that profit from such cheap labor for short term gain (political donations). They care more about themselves and their “friends” than they do the rule of law.
The GOP is so ignorant they can’t extrapolate that the same condition will exist with illegal aliens becoming dependent on government and voting for the party of free stuff. This will fundamentally change the electoral equation (and culture) of our nation forever. They tell themselves that their motives are pure and righteous, but they fail to understand such a plan is bad for everyone in the long run (including the illegal aliens) except the party of free stuff and big government.
There are no winners other than the party of free stuff. Both the affected and productive lose. It’s easy to change the law. It’s difficult to change a culture. Our nation provided power to selfish people that do not understand this and we are about to do so again.
It has nothing to do with race and everything to do with culture. It’s very hard to change culture and this is why most nations in history were separated by culture from other nations and peoples. Tribalism is the normal human condition. Like people who share the same culture. America shattered this truth for a short time. America’s success arose from accepting other peoples who wanted to share our culture regardless of tribe.
This was our national strength with two exceptions - our ancestors brought people here against their will as slaves and many of them developed their own cultural enclaves (mostly in the inner-city) as tribes have done since the beginning of mankind.
The second exception is the debate we now witness. We are about to make the same mistake with people we call illegal aliens and they call undocumented workers. The reasons they are here are largely identical to the reason our ancestors brought slaves to America.
Why? Because good men failed to recognize it or stop it. We are apathetic to history and don’t understand the importance of culture and the power of tribes. It is also a moral failure, but I will leave that for another day. The politicians and businesses profit and the rest of us pay for generations and understand the ramifications.
Race guarantees nothing, but the pull of tribalism is still a strong draw. Culture guarantees everything and there are more than enough examples of millions of great Americans who willingly joined our tribe. I think many among us automatically assume that everyone will assimilate to our tribe because we understand it to be superior. If only it worked like that - history shows otherwise.
Long rant and I am going to get off my contemplative soapbox and go enjoy the sunshine.
So, now everything Detroit buys should be delivered prepaid or COD. No more credit, period.
That one was whitey's fault. 24 years later it was black misbehavior. Black malfeasance followed.
If they do not pay for contractors, the contractors should stop doing business with them. If they don’t pay for electricity, cut it off.
As for pensions, make the employees fund their own dang pensions.
How many bureaucrats, paper-pushers, desk jockeys, chair warmers and assistant assistant supervising managers assistants were fired??
This is simply a desperate attempt to avoid formal bankruptcy in an effort to preserve union contracts. In a formal bankruptcy, union contracts could be abrogated, and the bankruptcy trustees would be in a a very awkward spot if they chose to screw everyone BUT the unions.