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Observers of the Emergency Manager Takeover in Michigan tend to believe that this takeover was not accidental or motivated by good intentions by GOP Governor Snyder and his cronies.

This interview conducted by Mark Maynard, a local blogger who covers political issues broadly defined, with Alec Gibbs, an attorney based in Flint who has been deeply involved with the fight against Emergency Managers for several years now, is simply a must read. In it, Gibbs confirms that even one's worst suspicions about the EM strategy are probably not as bad as what has been documented, nor as bad as what is still unfolding.

Here is their conversation: Everything you ever wanted to know about the Emergency Manager takeover of Michigan, and how we allowed it to happen

And here are some excerpts to convince you to go read the whole thing (all links are from the original source).

This exchange discusses the very large amounts of money that are being spent to make the pension funds (themselves in the billions of dollars) more accessible to exploitation:

ALEC: Now, it’s important to remember that current Michigan Governor Rick Snyder left his venture capital firm, Ardesta, in 2008, becausehe was frustrated with the reluctance of “institutional investors” to finance venture capital projects in Michigan. This includes pension funds, as well as MERS [Municipal Employees' Retirement System]. And MERS, by the way, is moving towards direct investments in local firms. And you know what their chief investment officer cites as the reason for that? Michigan’s “competitive” business environment, courtesy of Rick Snyder. And his Emergency Managers have pushed these transfers, in Flint, in Pontiac, and in other cities, which have substantially increased the investments that MERS can make. In addition to that, the Emergency Managers control federal and state grant allocations, and the Michigan Economic Development Corporation (MEDC), through the Michigan Strategic Fund (MSF), is responsible for distributing even more money. In recent years, it’s worth noting, the MEDC and the MSF have been the targets of bipartisan criticism for reporting inflated and misleading job figures. And the Mackinac Center is at least publicly opposed to the existence of the MEDC and other corporate subsidization programs.

MARK: OK, so your sense is that Michigan’s Emergency Managers were given the word to push their locally controlled pension funds into MERS, with the thought that they could then dole the money out to venture capitalists friendly with the administration, etc…

ALEC: That’s really the question isn’t it? In other states, like New Jersey for example, there has been pretty extensive reporting on this. For example, The Nation has connected Paul Singer, the founder and CEO of the hedge fund Elliott Management Corporation, to Chris Christie’s “pension reform” project, and Singer was also a major contributor to the short term PAC RGA Michigan 2010. According to the disclosures that are available he was the third top contributor at $500,000, just behind Robert Perry and David Koch. Just over $482,000 came from Steve Cohen of SAC Capital Advisors, another hedge fund. SAC, by the way, just settled a major insider trading case that arose out of the University of Michigan in 2008, and one of their hedge fund managers, Matthew Martoma, was convicted of insider trading in February. Now, in light of these known contributions, and in light of the fact that Snyder’s NERD fund had dark money pouring into it in cities with EMs, aren’t there a lot of questions we should be asking about these transfers? After all, the transfers to MERS involve hundreds of millions to billions of dollars.

Now with respect to MERS, there’s also been a significant increase in direct lending, which is alsoreflected in the national market. This is a way of avoiding the stricter lending standards that apply to banks. In other words, these pension funds are now supplying credit to “midsize” companies that can no longer get loans from banks because their credit isn’t good enough. There are arguments marshalled in favor of this, including the elimination of financial intermediaries or middlemen, but this is happening with very limited public input, and in an era of politicized financing. We should be concerned, and we need independent and progressive financial experts to scrutinize what’s happening with our pension funds.

Here's Alec's explanation of how Flint has been left holding the bag:
MARK: And how did Flint fare? Did aggressive privatization solve all of your problems?

ALEC: Clearly not. Most privatization is simply a boon to some favored special interest. Even if you privatize or outsource public functions, you still have to pay for them. For example, when Flint transferred the local pension system to MERS, the city initially claimed it was saving hundreds of thousands of dollars each year in administrative costs. But, in fact, there was no cost-savings, because the pension system was the entity responsible for paying these administrative costs. Additionally, the transfer to MERS will probably cost the City of Flint even more in the long term, because MERS uses a shorter actuarial period to calculate the city’s payment obligations, which means that the payments to the pension system will be set to increase in the short run.

And here are the two of them discussing the victim-blaming rhetoric that has been exercised to meet political ends:
MARK: So it was changed to reflect the increased powers of a state appointed receiver?

ALEC: Yes. And I think that it was also a reflection of strategy. Because this law was sold on a theory that these cities were mismanaged into the ground to the point of a generalized crisis, not simply a financial one. So for example you have the Flint EM claiming that retiree health care threatens public safety. You have Kevyn Orr telling the Wall Street Journal that Detroit workers are entitled, stupid, lazy and fat [sic: rich, from the original quote]. [WSJ behind a firewall, sorry] The backlash against that was pretty strong, so he backed away from those comments when he spoke with the local press. But it was very revealing: These people, members of the financial and technocratic intelligentsia that dominates Wall Street and Washington, think that workers don’t deserve anything.

You see this very clearly in the Detroit water shutoffs. I think that they are very happy to cut off water to unemployed Detroit families, because they’ll either die from dehydration or leave, paving the way for the Detroit Future City plan. The shutoffs weren’t designed simply to improve the water system’s finances; if that was the plan, they would target the corporate accounts, but they don’t want to do that.

In order to convince people that this is a legitimate project, its architects must lay the blame on the working class. They are very cognizant of the parallels to authoritarianism; Kevyn Orr was quick to point out that the takeover would be perceived as a fascist exercise in emails that were released as part of a FOIA request. [Actually, Orr was the recipient of that one, though he didn't disagree. The whole series of emails is truly chilling, worth following the link.] That was in relation to the idea of the Bloomberg Foundation financing the takeover, which also raisesinteresting questions about the secret donors who paid for Orr’s $4200 a month condo at the Westin Book Cadillac.

But the corporate press doesn’t dwell on this. Instead there are two competing narratives, one that is reflective of American liberal or Keynesian thought, and the other reflective of more right wing presuppositions. In the liberal framework, which Flint’s Mayor Dayne Walling articulates quite well [in an interview with Eclectablog], this is the inevitable consequence of the decline of the manufacturing industry, and is largely beyond the control of local officials, even if local corruption might exacerbate the problems. The right wing narrative blames unions and local corruption almost exclusively, and that’s the narrative you hear coming out of Orr when he meets with the Wall Street press.

This is a very long, very comprehensive interview, and I can't claim to have pulled the best segments from it. There is much insight and analysis within, along with Gibbs' recommendations at the end about what WE CAN DO to set this aright.

Please, please, go read it. Come back and let us know what you think afterwards. Tell us then how you plan to get involved.

Originally posted to peregrine kate on Sat Aug 09, 2014 at 07:42 AM PDT.

Also republished by Motor City Kossacks and Michigan, My Michigan.

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