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High Stakes in Looming Detroit Legal Battle
The American Interest ^ | Walter Russell Mead | Walter Russell Mead

Posted on 06/17/2013 2:38:22 PM PDT by JerseyanExile

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In Detroit, bankruptcy lawyer turned city manager Kevyn Orr is playing hardball while preparing the city for a likely Chapter 9 bankruptcy. He’d like the various stakeholders to negotiate a “pre-packaged” bankruptcy in order to avoid a drawn-out and extremely costly legal battle, but reaching agreement could be incredibly tough, as Reuters points out:

[G]etting everyone on board for a pre-packaged plan is easier said than done, said Douglas Bernstein, a bankruptcy attorney at Plunkett Cooney in the Detroit area.

“When it comes to a pre-packaged plan, the big question is whether he (Orr) would have enough acceptance going into court,” he said. “He would need sufficient votes from all the creditor classes and that will not be easy.”

One problem is that Detroit’s creditors or stakeholders have different priorities. The main areas of uncertainty surround its unions and pension funds, which may not have much bargaining room and may feel their best chance lies in bankruptcy proceedings rather than a negotiated pre-packaged deal.

By holding out, the city’s unions and pension funds would be setting up a legal battle that could lead all the way to the Supreme Court. At issue is a conflict between federal and state law: Michigan’s state constitution specifically protects pensions and retirement benefits, but that clause is in tension with federal bankruptcy law. The unions would likely argue that the 10th Amendment “trumps the notion that federal law is supreme.”

If the Supreme Court rejected that argument, it would deal a major blow to public sector unions across the country. According to bankruptcy lawyer Michael Sweet, “The last thing (union pension funds) may want is for a judge to rule on that….Because if the judge ruled against them, it would open the floodgates.” Every public sector union in the country would then be on notice that underfunded pension programs will ultimately be welshed on by cities and states.

If the unions prevailed, though, federal bankruptcy law could be called into question elsewhere. Either way, it’s a major blow to blue model government: either states’ rights get a big boost or public sector unions take it on the chin.


TOPICS: Business/Economy; Government; News/Current Events; US: Michigan
KEYWORDS: 10thamendment; abortion; bankruptcy; chapter9; deathpanels; detroit; douglasbernstein; governmentunions; kevynorr; michaelsweet; michigan; obamacare; plunkettcooney; tenthamendment; unions; zerocare

1 posted on 06/17/2013 2:38:22 PM PDT by JerseyanExile
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To: JerseyanExile

Screw the union $h!tbags. Their greed and corruption was a large part of this as well as their intimate ties to the National Socialist Democrat Party. You all killed the golden goose and now you get to eat crow.


2 posted on 06/17/2013 2:48:14 PM PDT by RJS1950 (The democrats are the "enemies foreign and domestic" cited in the federal oath)
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To: JerseyanExile

“Every public sector union in the country would then be on notice that underfunded pension programs will ultimately be welshed on by cities and states.”

Let the welshing BEGIN!!


3 posted on 06/17/2013 2:49:22 PM PDT by 2harddrive
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To: JerseyanExile
The unions would likely argue that the 10th Amendment “trumps the notion that federal law is supreme.”

Gee, they didn't behave like that for Scott Walker 2 years ago now did they?

4 posted on 06/17/2013 2:52:22 PM PDT by taildragger (( Tighten the 5 point harness and brace for Impact Freepers, ya know it's coming..... ))
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To: JerseyanExile

The union pensions and contracts are just torts, like any other.


5 posted on 06/17/2013 2:54:13 PM PDT by NVDave
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To: JerseyanExile

The folks in charge of Detroit gave the folks NOT in charge exactly what they asked for, a free lunch. Since there IS no such thing, it’s time to pay the piper. Ooops, no money. My heart bleeds for them....NOT.


6 posted on 06/17/2013 2:54:13 PM PDT by cloudmountain
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To: JerseyanExile
I'm not sure where they are going with this bankruptcy. Long term outstanding debt is about $17 Billion, not including pension liabilities.

Assets could range over $50 Billion if you count the DIA's collection, Belle Isle, and the water department. Looks like the real estate and the paintings should cover things.

7 posted on 06/17/2013 2:56:02 PM PDT by Former Proud Canadian (The IRS--a softer Gestapo)
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To: JerseyanExile
Go here folks...

http://www.freerepublic.com/focus/news/3031962/posts?page=15#15

8 posted on 06/17/2013 2:57:29 PM PDT by taildragger (( Tighten the 5 point harness and brace for Impact Freepers, ya know it's coming..... ))
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To: 2harddrive

Compared to what will happen in other large cities, this looks pretty good from a conservative point of view.

I guarantee we’ll end up paying out hundreds of billions in bailouts when cities like Chicago are forced to quit digging.


9 posted on 06/17/2013 2:59:04 PM PDT by cripplecreek (REMEMBER THE RIVER RAISIN!)
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To: JerseyanExile
This article didn't mention...

They are gonna loose their Retiree-Health-Care, and get shuffled to Obamacare and Medicare, no ifs ands or buts per Mr. Orr.....

How is that hopey changey workin' for ya..

10 posted on 06/17/2013 2:59:31 PM PDT by taildragger (( Tighten the 5 point harness and brace for Impact Freepers, ya know it's coming..... ))
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To: JerseyanExile

The unions making a 10th Amendment argument. Talk about irony...


11 posted on 06/17/2013 3:01:13 PM PDT by Lurker (Violence is rarely the answer. But when it is it is the only answer.)
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To: Former Proud Canadian
I repsectfully disagree.

Total debt is about 19 billion with the majority being the Pension Liabilities. Orr does not want to sell the "Assets" you mentioned to leave something for civic pride and some cornerstones to rebuild the city on.

Belle Isle will probably get some sort of a State deal being floated, with the H20 Dept going regional with new management already cleaning up that cesspool.

The DIA, that it up in the air, again Orr doesn't want the city pillaged like something out of warn torn Europe, I give him kudos for the Optomistic attitude.

12 posted on 06/17/2013 3:03:48 PM PDT by taildragger (( Tighten the 5 point harness and brace for Impact Freepers, ya know it's coming..... ))
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To: JerseyanExile
The unions would likely argue that the 10th Amendment “trumps the notion that federal law is supreme.”

That would be interesting to witness: a democrat front arguing for strengthened states' rights. Wow!

13 posted on 06/17/2013 3:14:47 PM PDT by RobertClark (My shrink just killed himself - he blamed me in his note!)
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To: taildragger
"Civic Pride"? Most Detroiters couldn't spell that phrase let alone define it. I don't think there has been much "civic pride" in Detroit since 1960.

I forgot that since the Chrysler and GM bond debacles contract law in the US is more like a spoils system. I would not be a happy bondholder getting 10 cents on the dollar while the DIA is sitting on paintings that could be liquidated so I can get paid.

This will be an interesting bankruptcy.

14 posted on 06/17/2013 3:15:06 PM PDT by Former Proud Canadian (The IRS--a softer Gestapo)
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To: taildragger

Orr is looking to the future and the need for things like art as business is returning to the city. I do think the state should take over stewardship of things like Belle Isle till the corrupt are driven from power. (Belle Isle is a big money maker)

There is big time private money moving into Detroit and pledging to move into Detroit once things settle. The new bridge alone will bring in a lot of warehousing and freight related jobs.


15 posted on 06/17/2013 3:16:57 PM PDT by cripplecreek (REMEMBER THE RIVER RAISIN!)
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To: cripplecreek

If I was a creditor I would demand that the art be sold to pay the debts of Detroit. On what basis do you assert that there is big time money moving into Detroit once things settle out? When things settle out the vast majority of Detroit citizens will be black with the majority of them on welfare, disability or living off a government job. If I were big money I would stay away.


16 posted on 06/17/2013 3:40:49 PM PDT by rcofdayton (.)
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To: rcofdayton
If I was a creditor I would demand that the art be sold to pay the debts of Detroit.

If you were a creditor you would be a moron for loaning money to them knowing they couldn't pay it back. These creditors just figured uncle sugar would eventually pick up the tab.

Detroit is one city the taxpayers nationwide won't be forced to pay for.
17 posted on 06/17/2013 3:46:41 PM PDT by cripplecreek (REMEMBER THE RIVER RAISIN!)
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To: JerseyanExile
underfunded pension programs will ultimately be welshed on by cities and states

That's racist!

18 posted on 06/17/2013 4:05:19 PM PDT by glorgau
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To: AdmSmith; AnonymousConservative; Berosus; bigheadfred; Bockscar; ColdOne; Convert from ECUSA; ...

Thanks JerseyanExile.


19 posted on 06/17/2013 5:21:50 PM PDT by SunkenCiv (McCain or Romney would have been worse, if you're a dumb ass.)
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To: taildragger

Looks like things are fixing to get interesting in Detroit.

Detroit emergency manager orders probe of city’s pension fund

http://www.detroitnews.com/article/20130620/METRO01/306200080


20 posted on 06/20/2013 8:28:18 AM PDT by cripplecreek (REMEMBER THE RIVER RAISIN!)
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To: cripplecreek; All
Here is an excerpt that may or may not get pulled...

" Also Thursday, Orr signed an order authorizing an investigation of the city’s pension funds, including its investments and management. The investigation is expected to conclude in 60 days with a report from the auditor and inspector general. At that time, Orr will know whether he needs to remove the pension funds’ trustees and have state Treasurer Andy Dillon appoint a sole trustee. Orr told The News on Monday that he is might install a professional financial manager to oversee investments."

Wow...

Multiple Hints here..

* 1st, we will get the real numbers and look into who's running these things.
* Which makes you wonder, if Orr is sending a warning we think their is hanky-panky going on
* And again no BS numbers for this guy, these numbers will be the numbers and not political spin.
* And most important look, we may give you a new Trustee ( my guess is they won't like Andy Dillon)
* And we will hire a professional financial manager to oversee investments...

Imagine that, One professional firm, hmm, is Orr reading my post? A while back I said go with a low-load firm like Vanguard. No matter who he picks my guess is they will have gravitas and it won't be political hacks and lackies picking the investments.

Multiple Paradigm Shifts to right this sinking ship and running this by GAAP and FASB standards so that somepoint, maybe they can sell Bonds again...

Again I say, this is all gonna go over like a loud Fart in Church...

21 posted on 06/20/2013 8:59:36 AM PDT by taildragger (( Tighten the 5 point harness and brace for Impact Freepers, ya know it's coming..... ))
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To: taildragger

You should repost that over here for the usual “let it burn” crowd.

http://www.freerepublic.com/focus/f-chat/3033608/posts

Personally, I think “fixing” Detroit is a really good thing that could be a real feather in the GOP cap for the future. The reverend behind the Runaway Slave movie is speaking in Detroit this weekend with Americans for Prosperity and the Fredrick Douglas foundation. I really do think we’re making some inroads with blacks because of this sort of thing.

http://www.michronicleonline.com/index.php/community-original/12403-frederick-douglass-society-hosts-juneteenth-celebrations-race-to-economic-emancipation


22 posted on 06/20/2013 9:15:12 AM PDT by cripplecreek (REMEMBER THE RIVER RAISIN!)
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To: cripplecreek

Agreed!

Just like the guy in Louisiana that just switched parties!


23 posted on 06/20/2013 9:16:29 AM PDT by ConservativeMan55
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To: cripplecreek
You should repost that over here for the usual “let it burn” crowd.

I am not sure they want to listen. As someone who followed the Ford turnaround, discussing it with relatives in blue-states, they acted like could shive a git. When the funny part of it is, if their kids grow up to take Business-301, they prolly have to read about it, and maybe do a serious paper on it...

Again I am not sure they would want to hear the machinations of what it takes to fix something, or watch a Maestro in progress whether it is Orr or Mulally. These guys are not just good, they are the Wayne Gretzy of their arena's they come along once in a blue moon and you can't help but root for them to turn something around.

For those that are disinterested, I can't fix stupid, they can go turn on Dancing with the Vaguely Familiar.

24 posted on 06/20/2013 9:23:31 AM PDT by taildragger (( Tighten the 5 point harness and brace for Impact Freepers, ya know it's coming..... ))
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To: taildragger
Reading Reagan's nomination acceptance speech given in Detroit is an inspiration for Americans to do something to make America better.

I will not stand by and watch this great country destroy itself under mediocre leadership that drifts from one crisis to the next, eroding our national will and purpose. We have come together here because the American people deserve better from those to whom they entrust our nation's highest offices, and we stand united in our resolve to do something about it.

Address Accepting the Presidential Nomination at the Republican National Convention in Detroit July 17, 1980
25 posted on 06/20/2013 9:48:34 AM PDT by cripplecreek (REMEMBER THE RIVER RAISIN!)
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To: cripplecreek

Detroit is broke and it Detroit’s fault, including is residents. Detroit does not deserve civic pride. It does deserve to be pillaged, looted, and burned. If the city has assets that can be sold to meet their financial obligations, they need to be seized and sold.


26 posted on 06/20/2013 10:00:01 AM PDT by Little Ray (How did I end up in this hand-basket, and why is it getting so hot?)
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