Skip to comments.More Idiocy in Detroit
Posted on 07/22/2013 6:14:02 AM PDT by Kaslin
On Friday, a Michigan Circuit Judge Rosemarie Aquilina ruled Detroit bankruptcy is unconstitutional.
On Friday, a circuit court judge in Ingham County ruled that Detroit's federal bankruptcy filing violated a part of Michigan's constitution that protects union pensions. She ordered it withdrawn, a day after Detroit became the largest U.S. city in history to file for chapter nine bankruptcy.
Judge Rosemary Aquilina also said the filing did not honor President Barack Obama's work for the city, who she said "took [Detroit's auto companies] out of bankruptcy." Aquilina said she would send a copy of her order to Obama.
“It’s cheating, sir, and it’s cheating good people who work,” the judge told assistant Attorney General Brian Devlin. “It’s also not honoring the (United States) president, who took (Detroit’s auto companies) out of bankruptcy.”
The Detroit News reported "attorneys representing the pension boards hurried into Aquilina’s court to ask for a restraining order" on July 18, but Michigan Gov. Rick Snyder (R) and Detroit's emergency manager Kevin Orr "beat them by a few minutes" in filing for bankruptcy. The filing did not deter lawyers for union pension boards, who can use "court maneuvers to slow down federal bankruptcy proceedings."
The whole point of bankruptcy court is to resolve debt issues that cannot be paid. It is impossible for Detroit to meet its pension obligations and the only way to resolve the issue is in bankruptcy court.
In a common sense position, Michigan Governor Says Detroit’s Bondholders Part of Bankruptcy
Governor Rick Snyder of Michigan said today that the bondholders of the city of Detroit should expect to be “part of the process” of the largest municipal bankruptcy in U.S. history
“Realistically, if you step back, if you were lending to the city of Detroit in the last few years, didn’t you understand there were major issues and problems?” Snyder, a Republican, said on the CBS’s “Face the Nation” today. “Look at the yields they’re obtaining compared to other bonds. They were getting a premium.”
The plight of city pensioners is “one of the other tragic situations” in the Detroit bankruptcy, Snyder said on CBS. He said that during discussions with creditors, “no one” wanted to represent retirees, so he has asked the federal judge in the case to assemble a group of retirees to speak for them.
“Short-term through the end of the year, there won’t be any change,” Snyder said. “Beyond that, the real question also is, to the degree those pension plans are funded, that they’re our assets, that they are not part of this process.”
“It’s the unfunded piece, and there’s a terrible history there of mismanagement and poor investment that should get aired out in public and should be part of this discussion,” Snyder said on CBS.
In contrast to the idiotic circuit court ruling, the statements by governor Snyder represent a fresh breath of common sense.
1. Bondholders knowing took risks so they must take a haircut.
2. The funded assets of the pension plan cannot be touched
3. Bankruptcy court will resolve the unfunded portion
What's not to like about that?
And in regards to point number three, I would hope the burden falls on the highest pension beneficiaries (most likely city officials, police, firefighters) but also taking into account length of service, rather than something like 50% haircuts across the board.
I expect the circuit court ruling will be overturned with prejudice, the pension plans will take a huge haircut, boldholders will take some haircut, and the overall fairness of the final decision as to how pension haircuts will be applied is up in the air.
Many other cities will follow Detroit's lead.
The pensioners and employees need to take a haircut first.
Pray for America to Wake Up
This isn’t idiocy. Its the breakdown of the rule of law. She’s protecting her president and one of her party’s biggest constituencies. More evidence that the Democratic Party is interested in one thing — grabbing as much power and money as it can, rules be damned.
The judge is going to get slapped over this.
She’s an Ingam county judge ruling on events in Wayne county and trying to singlehandedly force a bailout.
I agree with the governor.
In a bankruptcy, the last in line should be those who bought risky bonds in order to receive a higher interest rate. They gambled. They lost.
A funded pension really doesn’t belong to the city. It belongs to the pensioners.
The unfunded pensions are the tragedy. I don’t believe that people who work in city clerk offices and the like are bad people just because they work for crooked or incompetent elected officials. And as they approach retirement, there is no denying they have needs just like everyone else.
Now, to the extent that they supported the system by campaigning for it, voting for it, and donating to it, they have culpability, but I’m guessing there are some who did not. I’m expecting to find some conservative voters in that group of unfunded pension holders.
So, with bondholders in last place, I’d expect pensioners to receive a real terms greater share of the proceeds. Even there, I can see some minimal graduated levels of protection. Those with outlandish pensions should be identified. Those with normal or minimal ones should be more protected.
In this, I’m not adding federal money. I’m thinking in terms of the city divesting itself of any sellable asset, to include real property.
It makes no difference what any judge says or doesn’t say.
If they are broke, they have no money. Period.........
I hope someone here can educate us on what exactly does the Michigan constitution state about honoring union pensions. It’s probably nothing but in the worst case it would force the state of Michigan to cover the city pensions. This would put the liberals of Michigan in a bad position, either pay up or remove the pro-union clause from the state constitution.
Oh, but that's where you're wrong. They "have" plenty of money. It's not really theirs but yours and mine. Do you really think Obamao will let Detwah go bankrupt? Too many votes involved.
This process has been in the works since 1965 and sped up after 1967.
No hope, close the place down, bring in the wrecking balls, oh wait a minute, no funds for the demolition? Just let nature take it's course, let it rot and collapse. The city will be the Dark Ages for about 500 years and then a “Renaissance” will happen...
This Renaissance theme is what kept Detroit going after the 1967 riots but it was running on fumes.
As long as there is CRIME, CRIME, CRIME nobody will want to go there.
I grew up there and walked in the downtown area (Cass Corridor) will two rocks in my hand, like a caveman, ready to clobber any thief who would get close to me...primitive Hobbesian world.
That is exactly why I have little sympathy for the creditors. They knew Detroit was never going to be able to repay the debt but they kept loaning money anyway because they expected the feds to step in and pay it off. They’re doing the same with hundreds of other cities as well.
However, I’m not completely unsympathetic. The environment for business is getting better due to GOP control of the state and I would offer the creditors property as partial payment. They’ll make the properties profitable one way or another. There might even be a way to do the same with the pensions. A developer’s deal to buy the old Packard plant appears to be days away now and he’s already hired the architecture firm that originally built the place.
Ingham County = East Lansing, 90 miles away? WTH??
Why should the pensioners take the haircut first? The bond holders take a risk when they invest in municipal bonds, especially from a city like Detroit. No doubt the interest rates were attractive enough so that the reward was worth the risk. They should take the biggest haircut.
What good is being a liberal if you can’t deny reality?
Lansing is the State Capital...
I am dumbfounded
>> those who bought risky bonds... gambled. They lost.
You also said:
>> I dont believe that people who work in city clerk offices... are bad people
Like you, I don’t believe they’re bad people, but whether they’re good or bad people is not the right question.
The relevant question is should they pay any of the cost.
Well, for years they consumed overly generous benefits, knowing that there was no way to fund them short of magic.
In a subtle way, isn’t that analogous to the bond buyers who took the upside of high interest rates?
Shouldn’t both bondholders AND pensioners, having enjoyed the upside well aware of the risk, now bear some burden in the downside?
And the judge was elected.