Skip to main content

The media coverage for the Detroit bankruptcy promotes Governor Snyder’s plan to default on Detroit debt and pension contracts by repeating the debt total over and over. Detroit has debt of $18 billion, $18 billion, $18 billion. Repeating the amount helps dramatize the notion there is no choice except to yield to terms handed down by a Federal Bankruptcy judge after considering proposals from an appointed city manager.

The state legislature of Michigan has the authority to govern every square inch of the state that includes Detroit. All states define and delegate their authority to govern the cities in carefully written enabling legislation, and also for all other sub state units of government. State legislatures grant authority to tax, borrow and spend and they can change it or take it away, anytime they want.

When there is no hope that a private company will ever be able to pay creditors, companies can expect to be dissolved and disappear in a bankruptcy. The state of Michigan and the city of Detroit cannot disappear and the state always has taxing authority that assures it can raise revenue to pay its bills. Michigan is not bankrupt.

Bond holders have a written contract that includes the state’s full faith and credit or some other written guarantee of payment. Pension holders have contracts and state constitutional guarantees of payment. Even if the state legislature will not vote new taxes and the state treasurer cannot borrow from anyone, the legal obligation for the state to pay is delayed, not cut or eliminated; that is unless the governor is successful in having his state’s contracts and laws overruled by a Federal judge.

Michigan’s elected state officials could have intervened long ago or during the many years in between as the auto industry abandoned Detroit. They continue to have complete authority and ability to solve Detroit’s financial problems, however divisive that might be. Instead the governor and the state legislature are choosing to pass the buck. They want an un-elected Federal bankruptcy judge to intervene and set Michigan budget priorities for them.

America’s high school students always learn the United States Constitution makes the Federal government supreme within its jurisdiction but powers not delegated to the United States by the constitution, nor prohibited by it, are reserved to the states. Governor Snyder and Judge Rhodes assert federal bankruptcy law can be used to wipe out state constitutional protections for pension holders and to meddle in statewide finances. If Federal bankruptcy law takes precedence over something as basic as state financial contracts, then no independent powers are reserved for the states. It forces states to accept the same relationship to the Federal Congress that Detroit has to Michigan: a subordinate relationship.

There is no previous example of a Federal Judge willing to apply federal bankruptcy law to a state as I have read several times because no one else has had the nerve to do it. Professional integrity typically brings restraint, especially for judges who want us to think they are wise and intelligent. Judges with their own agenda have been around a long time, but the impression keeps growing that judges are appointed expecting to be a part of a national political agenda.

Detroit continues to disintegrate because the automobile industry left Detroit. Long ago from the 1940’s to the 1960’s when Walter Reuther was president of the United Auto Workers union he tried hard to have the auto industry and corporate America take responsibility for more than their profits. He wanted companies to care about and take responsibility for their communities and the people working for them.

There was broad national political support to bail out debt ridden General Motors and Chrysler, but I am not hearing even token political support to maintain the pensions of wage earners and working people, only excuses and a media campaign for a power grab by appointed judges to do the dirty work. Walter Reuther would be sick and so should you.  

Originally posted to Fred Siegmund on Tue Mar 25, 2014 at 01:59 PM PDT.

Also republished by Community Spotlight.

EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

  •  Detroit is being publicly punished by a State (27+ / 0-)

    GOP government that will never deal fairly with an urban area that won't vote for them.  Wonder why.

    Building a better America with activism, cooperation, ingenuity and snacks.

    by judyms9 on Tue Mar 25, 2014 at 02:11:22 PM PDT

  •  People don' know the story (15+ / 0-)

    only the sound bytes.
    The MSM won't cover it honestly and unless people are willing to look for honest news coverage, they will accept the lying sound bytes of corporate media.

    This story should be spread to everyone, every where for if Snyder and his ilk get away with stealing the honest pensions from workers, gets away with breaking the contract made, gets away with abusing the rights guaranteed by the state contracts....then any state can do the same.

    People need to be made aware of this.

    “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both.” Louis D. Brandeis

    by Jjc2006 on Tue Mar 25, 2014 at 03:07:24 PM PDT

  •  Bankruptcy does not mean (11+ / 0-)

    that the bankrupt party has no ability to ever pay. It can simply be that the debtor cannot pay his debt per the terms of the debt. Detroit can not fulfill its financial promises to its creditors or to its pensioners or anybody else. All of these items need to be reduced and extended, through a bankruptcy process, in order for the city to start anew. If you have a huge city that quickly undergoes a major shrinkage in its population and GDP, it is natural that its financial obligations must be severely reduced. Otherwise no one is ever going to want to move their families or businesses to the city. This is a good thing, and necessary.

    •  Count on doc2 to dissimulate a nice neolib argumen (8+ / 0-)

      t.

      Bondholders BY DEFINITION take on the risk of default. Why does that almost never get stated? It's right in the language of the bond itself -- there is no absolute guarantee of repayment. That scam, that bondholders have "priority" and sacred contract rights to be "made whole," or "no one would ever buy a bond again," is just a comfortable fraud perpetrated by the Few. Bonds and stocks are risky investments, and the "risk premium" is built right into the pricing and market for the instrument.

      Pensions, as I understand the Detroit case, are funded by both payments by pensioners and deferred compensation from future revenues. These are earned and vested benefits that the tapeworms among the "Right" want to steal. Here's a little note from a fairly conservative fella who explains what's going on, what the context and history are, a lot better than I could:

      Detroit’s current citizens and the public employees who serve them are not the cause of Detroit’s fiscal problems. They are the victims of forces beyond their control, including globalization, capital flight and racism. No one can, with any seriousness, blame Detroit’s librarians, social workers, garbage collection workers or street cleaners for the city’s catastrophic loss of population and tax base, the long decline and near-collapse of the Big 3 auto companies, or the 1967 riots, which launched a frantic exodus of businesses, white residents, and money from the City of Detroit to the suburbs.

      As the suburbs grew and new highways encouraged sprawl in the 1950s and 1960s, Detroit’s manufacturing employment base and population—and especially its white population—began to decline. As Thomas Sugrue has pointed out, between 1947 and 1958, the Big Three built twenty-five new plants in the Detroit metropolitan area, all of them in suburban communities, most more than fifteen miles from the center city. As the jobs moved away, so did the city’s residents....

      It’s unrealistic to expect Detroit’s remaining 700,000 residents, more than one-third of whom have incomes below the poverty level and whose per capita income is only $14,000, to support a city and an infrastructure built for 1.8 million. The state of Michigan and the federal government should be subsidizing the re-population of Detroit, paying people to move there, to buy and repair homes, and to invest in the city’s future—the way we once subsidized the population of the frontier. Instead, the governor has chosen to attack the city’s employees, breaking a bond of trust that has helped keep them on their jobs through the most trying times.

      Legal scholars are debating whether federal bankruptcy law trumps the Michigan constitution and allows a bankruptcy judge to reduce the vested pension benefits that retirees and current employees have earned. The Michigan constitution itself is clear. Article IX, Section 24 provides: “The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.” The provision is so utterly clear that Michigan’s Attorney General has broken with Governor Snyder and will argue in court that the governor has no power to use bankruptcy proceedings to reduce accrued Detroit’s pension obligations.

      In other words, it is unconstitutional and illegal for the governor or any state official to take actions to impair the full right of Detroit’s public employee pensioners to the pensions they earned. As an agent of the governor and the state of Michigan, Emergency Financial Manager Kevyn Orr had no authority to include Detroit’s pension obligations in a bankruptcy petition, as he did. I believe the state of Michigan will ultimately be obligated by its constitution to make good on those pension obligations if they are diminished or impaired by the bankruptcy judge....

      The average pension for non-uniformed retirees was less than $19,000 a year in 2011, and future benefits were reduced by more than a third in 2012. Previously, a thirty-year employee would receive a pension of 55% of final average pay and the pension would be increased by 2.25 percent of the original pension amount each year as inflation protection. Under the new, lower benefit structure, a 30-year employee would receive a pension of 45 percent of final pay and receives no COLA. ...

      "Detroit: Pensions, Racism and Bankruptcy," http://www.epi.org/...

      Like Mayor Daley, destroying the decent black housing and neighborhoods in Chicago under "Urban Renewal" to force blacks into crappy City housing horrors like Cabrini Green and Robert Taylor Homes, to "ensure" they voted Democratic straight tickets, the Koch turds in Michigan are hoping inter alia to "de-vote" a potential opposition bloc and enrich their buddies at public expense and private pain.

      "Is that all there is?" Peggy Lee.

      by jm214 on Tue Mar 25, 2014 at 06:46:24 PM PDT

      [ Parent ]

      •  How is this responsive to doc2? (4+ / 0-)
        Recommended by:
        Sparhawk, EdMass, patbahn, Victor Ward

        1) Bondholders and "risk of default" - Detroit is not a sovereign, it can only default in bankruptcy court, which is where it finds itself, contra the title of this diary. So, yes, they are at risk of default, but that risk is realized through bankruptcy court, which means that Detroit is in fact bankrupt.

        2) Pensions. This seems like the key sentence of the large quote you posted:

        I believe the state of Michigan will ultimately be obligated by its constitution to make good on those pension obligations if they are diminished or impaired by the bankruptcy judge....
        Michigan law allows municipal BK under conditions far more restrictive than many other states, its constitution has a provision that offers a higher level of protection to pensions, and Detroit's biggest bond problems stem from "certificates of participation" that Detroit offered in lieu of actually funding its pension. So, yes - that does seem like a problem for Michigan's courts, and not federal BK courts, to address. But I don't see how this addresses what doc2 wrote.
        •  Did you not read what doc2 wrote? (0+ / 0-)
          financial promises to its creditors or to its pensioners or anybody else. All of these items need to be reduced and extended, through a bankruptcy process
          As someone once said, Reading Is Fundamental.

          If you don't watch news, you're un-informed. If you watch Fox news, you're mis-informed. (paraphrasing Mark Twain)

          by edg on Wed Mar 26, 2014 at 01:22:27 PM PDT

          [ Parent ]

          •  I read, did you? (2+ / 0-)
            Recommended by:
            doc2, Sparhawk

            I picked out the one key sentence amongst the mass of text copy/pasted on the topic of pensions. Detroit's obligations do, in fact, need to be reduced. That's for the BK court.

            If Michigan's Constitution is interpreted by Michigan courts as giving pensions 100% protection then Michigan better explain where the money will come from, because Detroit doesn't have it. In fact Detroit hasn't had it for years - pretending to fund pensions while not doing so was the entire point of the "certificates of participation" from the mid-2000s.

            That mass of text included one sentence indicating MI would have to cough up the money - this is disputed below, and I doubt MI will actually do so, though early on an Ingham County judge seemed to think this clause was binding on state officials.

      •  eh (1+ / 0-)
        Recommended by:
        Whatithink
        Bonds and stocks are risky investments
        that's why there are rating agencies

        ultimately it's trust

        do you trust someone who didn't repay their debt?

        it's actually very very simple

        it's not some wall street wool over one 's eyes. it's debt. payment. you borrowed, you failed to pay, why would anyone lend you anything again?

        •  Sure, I'd trust someone who committed huge frauds (0+ / 0-)

          in mortgage-and-derivativeland to "make good" on  obligations, because those seem to be backed up by a willingness by our Rulers to strip the real regular wealth of ordinary people to "pay off" fake bets. As to trusting cities to make good on debt. payment., as your wall street wool gets pulled over all our eyes, and everything is on the road to privatization of profit and socialization of costs and pain, there are probably few munis that will meet your simplistic morally impaired test.

          Yeah, and those rating agencies are also proven to be honest and infallible too, right?

          And since when to the Reds who are killing our culture to enrich themselves and de-right the rest of us get to say what function and value "trust" is to have in economic and social relationshps?

          Even individuals who default and get foreclosed on, or can't pay the 27% vig on credit cards or get out fro under crushing student loan debt, your banksters are still willing to loan money to them, to get them further in the debt. hole.

          "Is that all there is?" Peggy Lee.

          by jm214 on Wed Mar 26, 2014 at 09:48:56 AM PDT

          [ Parent ]

          •  i hear the rant (0+ / 0-)

            but what about the fundamentals? if you borrow, and don't pay back, you experience social opprobrium? bad?

            •  What is bad ... (0+ / 0-)

              is how subjectively the opprobrium is applied. There are different standards for some cities compared to others. There are different standards for some individuals. How many times has Donald Trump gone bankrupt? There are different standard for companies driven to bankruptcy by Bain Capital compared to other companies.

              Without equality of social opprobrium, the natural inclination is to feel that the entire system is rigged.

              If you don't watch news, you're un-informed. If you watch Fox news, you're mis-informed. (paraphrasing Mark Twain)

              by edg on Thu Mar 27, 2014 at 11:40:35 AM PDT

              [ Parent ]

          •  what exactly (1+ / 0-)
            Recommended by:
            Sparhawk

            is morally impaired about the test (not that I even offered a test).

            bonds were to raise money for a project. bonds were a promise to pay that money. it's a loan.

            you saying it's ok to not pay back a loan?

            let's forget usurious payday loans and shit like that, that's borderline con artistry.

            but a city-issued bond? what is that?

      •  You cite... (1+ / 0-)
        Recommended by:
        jm214
        Detroit’s manufacturing employment base and population—and especially its white population—began to decline.
        AND
        It’s unrealistic to expect Detroit’s remaining 700,000 residents, more than one-third of whom have incomes below the poverty level and whose per capita income is only $14,000, to support a city and an infrastructure built for 1.8 million.
        Why do people always see the scenario where white people are the only ones who should make a decent living. If a city is predominantly black, or hispanic, or asian, why do articles always assume "well, it's black and poor now so that's just the way it is".  Because you then cite:
        The state of Michigan and the federal government should be subsidizing the re-population of Detroit, paying people to move there, to buy and repair homes, and to invest in the city’s future—the way we once subsidized the population of the frontier.
        Which says to me that we must get affluent white people to save the city. No, no, no! Subsidize the minority population already there!!! Why do the white populations get the carrots while black households don't get a dime?? There are so many examples on DK lately where there is this assumption that black poverty is 'just the way it is'. Point in case, the diary that made fun of the National Review article that was VERY racist, but there was a kernel of truth that nobody touched: crime is a big problem in inner city predominantly black neighborhoods. Not because they are black, ffs, but mainly because of lack of opportunity in jobs and poverty. But nobody wanted to even admit that for fear of racism...and that is sad. It's like there is this "nothing to see here, move along" mentality for fear of being called a racist. Minority neighborhoods need a leg up and it's up to us to do something about it and not bury our heads in the sand.
        •  opportunity (1+ / 0-)
          Recommended by:
          Sparhawk

          Doesn't just fall out of the sky. Someone has to take risks and build it. Detroit is in a problem where no one knows how to build it. Public education has failed hard and money is disappearing from the city faster than it's citizens

  •  Aid for Ukraine, nothing for Detroit (17+ / 0-)

    The federal government in 2014.

    "When dealing with terrorism, civil and human rights are not applicable." Egyptian military spokesman.

    by Paleo on Tue Mar 25, 2014 at 03:27:15 PM PDT

  •  You don’t know shit from Shinola. (1+ / 0-)
    Recommended by:
    Andrew Lazarus

    If Detroit isn't bankrupt it's doing a dreadful job at feigning it. Detroit is (very) unfortunately not only the present, it’s also the future.  This is what a postmodern/postindustrial world looks like…

  •  You should have pointed this out to the past... (1+ / 0-)
    Recommended by:
    Mannie

    Democratic Governors of Michigan. Amazing none of them had your insight.

  •  In bankruptcy, there is no need for a city to (5+ / 0-)

    "disappear", what happens is that creditors get little or nothing paid on what they are owed.  This happens more frequently than not for businesses.  This is what happened to GM.  

    The dissolving of the debts of Detroit is how the city can re-organize so it can recover - just as GM has.

    The most important way to protect the environment is not to have more than one child.

    by nextstep on Tue Mar 25, 2014 at 05:10:16 PM PDT

    •  A city is not a giant corporation that hides fatal (2+ / 0-)
      Recommended by:
      DuzT, Calamity Jean

      defects in a million of its vehicles for 8 or 10 years. See "A Complete Guide To The Stunning GM Recall That May Be Linked To Over 300 Deaths," http://www.businessinsider.com/... The bankruptcy code makes a very clear disctinction between corporate windup or reorganization and municipal bankruptcy, for very good and well known reasons. http://www.thepearlman.net/...

      And hey, if corporations are "persons" for purposes of the First Amendment, "same as individual humans," maybe they ought to be hammered by the revisions to the Bankruptcy Code that make it so much harder for actual individual humans to get that "fresh start," like with student loans and credit card debt...

      Interesting that the behavior of GM, which got its bailout and "fresh start," and which was instrumental in stripping the City of population to make life better for its executives, is also involved in that ignition switch recall badness... what a surprise!

      "Is that all there is?" Peggy Lee.

      by jm214 on Tue Mar 25, 2014 at 06:56:04 PM PDT

      [ Parent ]

    •  detroit has multiple obligations. (0+ / 0-)

      special debt contracts,   GO bonds and pensions.

      with Detroit losing population and jobs and real estate
      values, that's a fundamental problem.

      how do you fix it?

      I'd suggest getting returned soldiers to move to Detroit.

      I'd also suggest a few million japanese ex-pats move there.

  •  So, what happened to Stockton, CA? (4+ / 0-)
    Recommended by:
    puakev, Sparhawk, Victor Ward, Loge

    The possibility of a city going bankrupt is sufficiently real that there is a chapter of the Bankruptcy Code, Chapter 9, for it. Perhaps in theory Detroit could stave of bankruptcy with massive tax increases, but that seems no more likely than Polaroid staving off bankruptcy by tripling the prices of its cameras and film. People wouldn't buy Polaroid, and people with taxable assets would leave or sever their business relationships with Detroit.

    I suppose in theory Michigan could raise taxes and assume Detroit's debts, but I don't see any legal theory that requires them to do so.

    Many (although not all) of Detroit's problems are not of its own making. That's too bad. But expecting Michigan or the USA to assume these obligations without any sort of "haircut" is unrealistic.

    •  Really? What's the inverse of a "haircut?" Like (6+ / 0-)

      what was provided to our TBTF "financial industry" and its vampire squids?

      Vested pensions are not the same animals as risk-bearing bonds.

      "Is that all there is?" Peggy Lee.

      by jm214 on Tue Mar 25, 2014 at 06:58:13 PM PDT

      [ Parent ]

    •  Recent CA Municipal BKs (3+ / 0-)
      Recommended by:
      Sparhawk, Loge, Andrew Lazarus

      - Stockton: revenue fell off a cliff because Stockton was Northern CA's poster child for the housing bubble.

        - Vallejo: mix of housing bubble and underfunded pensions.

        - Mammoth Lakes: ski town that promised an airport hotel to a developer in exchange for expanding its airport to allow jets, then afterwards found that the FAA had building height restrictions around airports. Oops.

    •  difference is Michigan law lets' only cities file (0+ / 0-)

      ch 9.

      it's not the role of the state to file this.

      •  CA allows cities to file BK (0+ / 0-)

        In fact, of the three cases I cited above, none of them required an "Emergency Manager" (couldn't remember whether Bell filed BK, but its case was different in many ways), whereas Michigan only allows an Emergency Manager to file BK for a city, and even then only with the Governor's approval.

        Snyder signed off on Detroit's BK, Detroit's elected officials had nothing to say about it.

        •  except the michigan constitution (1+ / 0-)
          Recommended by:
          JerryNA

          says something different.

          •  Says something different than what? (0+ / 0-)

            It's a fact that a state-appointed Emergency Manager filed BK on behalf of Detroit, after getting Snyder's sign-off, in accordance with MI's Emergency Management Law.

            Searching MI's Constitution for "bankruptcy" isn't turning up anything at all. And the search function is working, because searching for pension does turn up something relevant.

            •  michigan is a home rule state (0+ / 0-)

              not a dillon rule state

              as such, the cities and 19 home rule counties have a
              lot more power then elsewhere.

              https://en.wikipedia.org/...

              The theory of state preeminence over local governments was expressed as Dillon's Rule in an 1868 case: "Municipal corporations owe their origin to, and derive their powers and rights wholly from, the legislature. It breathes into them the breath of life, without which they cannot exist. As it creates, so may it destroy. If it may destroy, it may abridge and control".[2] By contrast, the Cooley Doctrine expressed the theory of an inherent right to local self-determination. In a concurring opinion, Michigan Supreme Court Judge Thomas M. Cooley in 1871 stated: "[L]ocal government is a matter of absolute right; and the state cannot take it away".[3]
              dissolution and bankruptcy are the ultimate acts
              limited to the cities.
              •  From that Wiki page: (0+ / 0-)
                The Supreme Court of the United States cited Municipal Corporations and fully adopted Dillon's emphasis on state power over municipalities in Merrill v. Monticello,[5] which upheld the power of Pennsylvania to consolidate the city of Allegheny into the city of Pittsburgh, despite the objections of a majority of Allegheny's residents. The Court's ruling that states could alter or abolish at will the charters of municipal corporations without infringing upon contract rights relied upon Dillon's distinction between public, municipal corporations and private ones.
                Doesn't this mean that the Federal standard is the Dillon rule, and not the "home rule" thing that I've normally only seen on road-side signs in deeply rural areas of CA?

                And that was in the late 1800s, municipal BK is from the New Deal in the 1930s, but it allows states to determine the conditions under which it can be asserted.

                •  that is a fine detail of (0+ / 0-)

                  conflicts of law.

                  the michigan constitution never gave this power
                  to the michigan legislature or executive.

                  bankruptcy law doesnt care who shows up but
                  it says something the governor lied to a state court
                  so they could file in federal court

            •  In accordance with a law (2+ / 0-)
              Recommended by:
              peregrine kate, la58

              that was nullified by voters then immediately reinstituted in whole by our wingnut/teabagger controlled government, with a "poison pill" symbolic appropriation attached, making it immune to future ballot initiatives under MI law.

              This odious law puts the appointed manager in charge of everything, it gives him the power to unilaterally dissolve contracts, override or dissolve the elected city council, and essentially function as a dictator, answerable only to the governor.

              Nothing happening in Detroit gets any public input. None.

              Republicans hate the city of Detroit, and have for decades. This entire procedure is meant to punish the city, it's residents, and it's retirees, while absolving the state of any responsibility, financial or otherwise.

              "A lie is not the other side of a story; it's just a lie."

              by happy camper on Thu Mar 27, 2014 at 06:25:22 AM PDT

              [ Parent ]

          •  And the Mi. voters (0+ / 0-)

            we shot down the EM law and the Repugs. put it back on the books against our wishes.

  •  Missing item (11+ / 0-)

    Snyder wants to have the bankruptcy judge to screw the pensioners owed money by Detroit while protecting the bond holders who knew they were taking a risk AND STILL SPEND MILLIONS ON THE HOCKEY ARENA! Also millions are owed to Detroit by the state, individuals, and communities has not been paid and the state has made no effort to collect it. Detroit was in the process of poor management for many years and the state in a hostile takeover has installed an insane management in an effort to stick privatization up the butt of the citizens.

  •  The Detroit school district has a $1.2B budget. (8+ / 0-)

    The water department has $1B in assets.  The pension fund is there for the looting.  Detroit is being pushed through bankruptcy so it can be plundered.

    And we love to wear a badge, a uniform / And we love to fly a flag But I won't...let others live in hell / As we divide against each other And we fight amongst ourselves

    by ban48 on Tue Mar 25, 2014 at 05:59:14 PM PDT

  •  Michigan is not Detroit (5+ / 0-)

    You seem to be confused about that.

    Bond holders have a written contract that includes the state’s full faith and credit or some other written guarantee of payment. Pension holders have contracts and state constitutional guarantees of payment.
    Detroit bond holders do not have any contract that includes the state's full faith and credit.  Pension holders have a state constitutional guarantee that their pensions cannot be reduced, but no guarantee that the state will fulfill a shortfall if Detroit does not have the cash to pay them.

    In general, you seem not to understand that Detroit is not Michigan and Michigan has no obligation to bail out Detroit.

    •  in short. detroit is bankrupt (5+ / 0-)

      And no one wants to bail it out.

    •  Reading comprehension problem? (2+ / 0-)
      Recommended by:
      ozsea1, Calamity Jean
      "...obligations of the State of Michigan AND ITS POLITICAL SUBDIVISIONS..."
      Seems to me Detroit is a "political subdivision" of the State of Michigan...

      "Ronald Reagan is DEAD! His policies live on but we're doing something about THAT!"

      by leftykook on Tue Mar 25, 2014 at 07:05:55 PM PDT

      [ Parent ]

      •  Good. (4+ / 0-)

        Now tell us how Detroit pays these obligations given its current resources, and provides normally-expected services to its residents which it arguably isn't providing today. Can Detroit raise taxes? Aren't Detroiters already paying higher tax rates than other residents of the state?

        And if Detroit doesn't have a way of paying this, then we're back to talking about Michigan, as the person you're replying to pointed out.

        Ultimately, Detroit has obligations scaled to a city of almost 2 million, while its current population is barely 700 thousand.

        •  And they made contractual agreements... (2+ / 0-)
          Recommended by:
          Calamity Jean, JerryNA

          ...and those agreements trump bond holders claims.

          The City of Detroit owns tangible objects worth a lotta money, and if they're gonna sell the city's art collection and the new stadium to cover the city's obligations, the pensioners come first, piss on Wall Street assholes who hold the city's paper...

          "Ronald Reagan is DEAD! His policies live on but we're doing something about THAT!"

          by leftykook on Tue Mar 25, 2014 at 08:12:07 PM PDT

          [ Parent ]

          •  ? (2+ / 0-)
            Recommended by:
            Sparhawk, Victor Ward

            A bondholder claim is a contractual agreement - with the city of Detroit. So is a pension. So is Detroit's vendor's bills, and its current payroll. They're all contractual agreements, and they can only be broken through municipal BK.

            The "pension" class of debt appears to have extra protection under MI's constitution. What that means is for MI's courts to decide - MI's constitution offers "extra protection" to that class of debt, but doesn't seem to indicate what happens if Detroit can't pay that debt from its own revenue stream.

            If that art gets sold, the DIA can kiss its ability to work with other museums good bye.

            •  According to the diarist (3+ / 0-)
              Recommended by:
              6412093, Calamity Jean, JerryNA

              The bonds come with warnings and disclaimers that the investments carry a risk, like all investments. and the level of risk is factored into to price of the bonds.

              If Detroit has been such an obvious financial basket case for thirty years, who the hell would buy its paper who wasn't a crook or an idiot?

              The only way anyone would make such an investment is if they knew that the fix was in and some swine of a judge would always award them their money over any union rabble, pensions bedamned...

              "Ronald Reagan is DEAD! His policies live on but we're doing something about THAT!"

              by leftykook on Tue Mar 25, 2014 at 08:55:54 PM PDT

              [ Parent ]

              •  UBS and Merrill Lynch (now B of A)... (2+ / 0-)
                Recommended by:
                Victor Ward, Calamity Jean
                If Detroit has been such an obvious financial basket case for thirty years, who the hell would buy its paper who wasn't a crook or an idiot?
                Presumably, somebody who was counting on the fact that Michigan's law makes it very hard for a city to file BK. And, possibly, somebody hoping to pass off the actual risk to bond insurers (which is a big argument in Detroit's BK).

                Alternatively, it appears the judge in Detroit's case doubts the legality of the "certificates of participation" that are a part of Detroit's problem - he's been rejecting the Emergency Manager's proposals for this debt as too generous.

                Doesn't change my point - it's all contractual agreements, since Detroit can't pay it all the entire thing gets sorted out in Federal BK Court because there's no other way to break contracts.

      •  Good cherry pick of out of context phrase (2+ / 0-)
        Recommended by:
        Victor Ward, nextstep

        Let's look at the whole sentence.

        “The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.”
        "Thereof" clearly refers to the pension plan / retirement system and the entity that is responsible for that plan / system.  

        Are you trying to claim that this clause makes the state and every political subdivision of the state jointly and severally liable for the pension and retirement obligations of each other?  That seems an unreasonable reading.  If that was the intent of this clause it would have been stated explicitly.

        •  Sounds to me like that's EXACTLY what it says. (1+ / 0-)
          Recommended by:
          peregrine kate

          And the State is not a band of innocent little angels, THEY owe the city a pile of money they haven't paid and they don't do anything to help them collect taxes owed them, some of which is owed by corporations, not just sleazy deadbeat absentee land owners. They're part of the con.

          "Ronald Reagan is DEAD! His policies live on but we're doing something about THAT!"

          by leftykook on Tue Mar 25, 2014 at 08:42:47 PM PDT

          [ Parent ]

          •  I think you're living up to your user name (1+ / 0-)
            Recommended by:
            Victor Ward

            Try to find anyone with any legal knowledge who agrees with your understanding.

            And the State is not a band of innocent little angels, THEY owe the city a pile of money they haven't paid
            Documentation please?
            and they don't do anything to help them collect taxes owed them, some of which is owed by corporations, not just sleazy deadbeat absentee land owners.
            What is the state supposed to do to help Detroit collect its taxes?  Does the state do this for other cities and counties?
          •  Here's a link detailing the stealing of City funds (2+ / 0-)
            Recommended by:
            JerryNA, peregrine kate

            by the state.  Michigan Municipal League report

            Snyder and the legislature have balanced the state budget on the backs of the cities, then called it "mismanagement". Many MI cities under emergency management would be solvent if the state paid them what they are owed by statute.

            Imagine all the people, living life in peace. You may say I'm a dreamer, but I'm not the only one. John Lennon

            by GwenM on Wed Mar 26, 2014 at 03:26:33 PM PDT

            [ Parent ]

  •  Detroit like many other rust belt cities (0+ / 0-)

    will never again be financially self-sustaining. It may be time to de-incorporate. I lived in a small city that did just that: Willimantic, CT.

  •  How do you spell "Fraud"? (5+ / 0-)

    G O P

    S N Y D E R

    The workers and pensioners of Detroit are the victims of a massive fraud, and it looks like the thieves are in charge of the prisons.

    Voters should select people to represent them in their government. People in government should not select people who may vote!

    by NM Ray on Tue Mar 25, 2014 at 08:26:11 PM PDT

    •  In MI, the wingnuts are running the asyum (1+ / 0-)
      Recommended by:
      NM Ray

      thanks, Governor Snyder, for EFFIN NOTHING!

      America's LAST HOPE: vote the GOP OUT in 2014 elections. MAKE them LOSE the House Majority and reduce their numbers in the Senate. Democrats move America forward - Republicans take us backward and are KILLING OUR NATION!

      by dagnome on Tue Mar 25, 2014 at 08:34:12 PM PDT

      [ Parent ]

  •  this is a lessen to all government wokers (4+ / 0-)
    Recommended by:
    Victor Ward, DuzT, citydem, Calamity Jean

    'a bird in the hand is worth two in the bush'

    aka.. Take your shitty raise now rather than be promised some big pension that probably won't be there later.

  •  San Bernadino was the third california city (5+ / 0-)
    Recommended by:
    Sparhawk, Pi Li, Whatithink, nextstep, thm

    to receive bankruptcy protection just last August.

    Your argument that it is unprecedented falls a bit short.

    There is no previous example of a Federal Judge willing to apply federal bankruptcy law to a state as I have read several times because no one else has had the nerve to do it.
    There is no hope Detroit will be able to raise taxes enough to pull themselves out of the hole they have made for themselves.  I understand you want the people of Michigan to bail out these folks.  But I also understand the reticence of the rest of the state to do so - given the rampant corruption and insane fiscal promises made by Detroit politicians over the years - promises that could never be met.

    I agree something should have been done earlier.  But, as of this point, somebody is going to take a haircut.

    If there is a lesson in this, it is that all municipal pensions should be brought under the umbrella of federal pension law - with all the rules and regulations  required therein.

    •  Social Security... (0+ / 0-)

      One of Detroit's two pension funds, I believe police and fire, serves folks who aren't covered under Social Security, because Social Security offers this as a choice to states/cities and Detroit chose not to cover them when it could have.

      I'd really like to know why this was considered to be OK, especially in a "labor-friendly" city as Detroit, and considering that neither of the two pension systems come across as terribly generous (excepting the "13th check" stuff, which was not really 'generous' so much as part of the overall underfunding of a not-so-generous system).

  •  The State owes the Cities billions of $$ (6+ / 0-)

    According to the Michigan Municipal League, the State has refused to pay the local communities what they are owed in Revenue Sharing, to the tune of over $6.2 Billion dollars.  MML Revenue Sharing report
    Detroit is owed well over $700 million. Many of the cities under emergency management would be solvent if the state paid what they owed to the cities. Flint would have over $5 million in surplus.
    Snyder and the legislature brag about making the tough decisions, but they basically stole from all of the local governments to balance the state budget, then they blamed the local governments for "mismanagement".

    Imagine all the people, living life in peace. You may say I'm a dreamer, but I'm not the only one. John Lennon

    by GwenM on Wed Mar 26, 2014 at 12:03:38 PM PDT

  •  I don't understand the argument. (0+ / 0-)

    If it's that Michigan is responsible for making sure its cities can pay their obligations, I don't know what the statutory basis for that claim is.  

    It's not the side effects of the cocaine/I'm thinking that it must be love

    by Rich in PA on Wed Mar 26, 2014 at 06:12:26 PM PDT

  •  This might be a useful link... (1+ / 0-)
    Recommended by:
    peregrine kate

    The Detroit Free Press ran a fairly comprehensive How Detroit Went Broke article back in September.

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site