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View Diary: Bankruptcy Ruling Goes Against Public Pension Plans (31 comments)

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  •  I would expect that the pensions will be hit hard (3+ / 0-)
    Recommended by:
    corvo, wilderness voice, nextstep

    in these cases.  The private sector pension plans are routinely hit hard.

    •  If they are put on the same footing (3+ / 0-)

      with all other creditors and the city is very deeply in debt, then all creditors will be hit hard. The usual debate is between the holders of the municipal bonds and the pension plans.

    •  And this is truly injustice since these benefits (1+ / 0-)
      Recommended by:
      chimene

      are contractually based, and the judge is basically voiding these contracts as having any binding authority, as representing a 'valid' obligation that should be paid as contracted.  This shouldn't be happening in private cases either. Pension benefits should be protected first, then the line can form behind that.

      When life gives you wingnuts, make wingnut butter!

      by antirove on Wed Sep 04, 2013 at 11:07:23 AM PDT

      [ Parent ]

      •  This is what happens in any bankruptcy (3+ / 0-)
        Recommended by:
        wilderness voice, MGross, nextstep

        Bankruptcy occurs when liabilities, contractual or otherwise, can't be paid.   It is designed to ensure that all creditors are treated in a fair and orderly manner while allowing the debtor (the city) to restructure and move on.

        There is no reason to treat pension benefits as any different in this regard than any other liability.

      •  Bankruptcy always voids contracts. (3+ / 0-)

        If bond holders don't get paid what they are owed that is voiding a contract. If parts suppliers don't get paid that is voiding a contract.

        •  Then let's make the order of payee fair: (1+ / 0-)
          Recommended by:
          chimene

          1) workers - first obligation.
          2) vendors supplying parts and services - they have payrolls to meet too.
          3) bond holders - big monied investors who accepted risk when buying the bonds on prospectus. If the prospectus wasn't clear on the real nature of the risk, well then the issuing bank should be held liable.

          When life gives you wingnuts, make wingnut butter!

          by antirove on Wed Sep 04, 2013 at 11:20:41 AM PDT

          [ Parent ]

          •  Three problems (1+ / 0-)
            Recommended by:
            nextstep

            1) Holders of municipal debt are not big monied interests but individuals often of relatively modest means.

            2)   Governments need to continue to borrow to fund operations. Doing this would massively increase succh borrowing.

            3)  The bonds contractually and by current law are not subordinated so you are changing the rules on investors after the fact.  

          •  That would require amending the (3+ / 0-)
            Recommended by:
            MGross, Justanothernyer, antirove

            federal bankruptcy code. While you are at it, you might do something about student loans as well.

            Not everybody who holds municipal bonds are large financial institutions. Their exemption from federal income tax on the interest has long made them attractive to small investors as well.

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