Gov. Rick Snyder: Government bailout is the wrong answer for Detroit
Source: CBS News
Gov. Rick Snyder, R-Mich., said Sunday on "Face the Nation" that granting Detroit a government bailout would be the wrong way to help the bankrupt city.
"I do not view that as the right answer," Snyder told "Face the Nation" host Bob Schieffer when asked whether he would ask the federal government for a bailout. "The right answer is, bankruptcy is there to deal with the debt question."
Snyder said the state cannot bail out Detroit, and while the federal government will make its own decision on a bailout, he said, "I don't expect one."
"It's not just about putting more money in a situation," the governor said. "It's about better services to citizens again. It's about accountable government."
Read more: http://www.cbsnews.com/8301-3460_162-57594750/gov-rick-snyder-government-bailout-is-the-wrong-answer-for-detroit/
Of course Snyder doesn't want Detroit to receive a government bailout in lieu of a declared bankruptcy. A bankruptcy would allow for everything he and his billionaire puppet masters have always dreamed of : a) the elimination or significant reduction of municipal workers' lifelong-earned pensions and health care benefits; and b) the auctioning off of Detroit's assets, so that Snyder's rich cronies could snap up valuable property, museum pieces, etc. for pennies-on-the-dollar.
Snyder is correct on one thing, though: a federal bailout is not going to happen.
Turbineguy
(37,332 posts)"private" instead of "public", that would be different.
Jack Rabbit
(45,984 posts). . . one who just happens to be a major donor to Governor Snyder and the Michigan GOP.
Can someone in Michigan name such a person, or am I just being cynical and paranoid to think there is one?
Crowman1979
(3,844 posts)I hope everyone back home votes this son of a bitch out of office.
N_E_1 for Tennis
(9,728 posts)The first large city to go completely privatized. I wonder which corporation will win the naming rights, as in Delltown, Mi.
Katashi_itto
(10,175 posts)Omni Consumer Products
http://upload.wikimedia.org/wikipedia/en/f/f3/OCP_logo.svg
Odious justice
(197 posts)The people who would likely get the first federal bailout money would be the hedge funds that purchased bonds from the city. The pension fund can't compete with their lobbyists.
There is evolving federal law about the guarantee of public pensions- and Congress can address that issue in a broad stroke that won't be labeled a bailout.
madrchsod
(58,162 posts)mountain grammy
(26,622 posts)the guillotine is too good for them.
Tears for the dismantling of a great American city. What can be done to stop this madness?
OmahaBlueDog
(10,000 posts)He had words of encouragement for the citizenry, referring to them as "Detroit Strong" and expressing confidence that the city will bounce back. His solution (in typical Buffett fashion): legalize pot and start urban agriculture on all of the vacant lots in Detroit.
...I've heard worse ideas
YOHABLO
(7,358 posts)Alkene
(752 posts)...paging John Carpenter.
"Snake Plissken... I've heard of you.
I heard you were dead!"
7962
(11,841 posts)THEY didnt mis spend the city money.
Demo_Chris
(6,234 posts)They elected people who did, as much as it was mismanaged at any rate.
Simply put there is no money. Or nowhere near enough. Not now. So something has to give.
7962
(11,841 posts)Civilization2
(649 posts)This is a common meme, blaming the people for the actions of the elite; "well they elected them". I think it shows just how broken this democracy is whenever I hear it. The people did not "elect them" to mismanage and rip us off,. blaming the people for the criminal actions of these "elected representative" is ridiculous. Giving the choice of something bad and something worse is a rather shitty excuse for a democracy.
The money is gone, but where did it go,. follow the money, who has it now? And why not take it back from them?? Just like in 2008 the money was not destroyed, it was moved, and some people now have it,. and they are holding it.
Igel
(35,317 posts)You assume that there was a pot of money that was somehow misspent instead of saving it for the present.
Cities spend as they collect. They made too many commitments. Then, when they were short of money because they were overspending, they took out a multi-billion dollar loan to avoid making some bad decisions. If you have a good reason to suspect that things will get a lot better, this can be smart. But if you don't, it's financial idiocy.
But it was political gold.
Nobody elected the politicians to mismanage. But they elected them based on how they dealt with the public employee unions. They elected them based on how they produced and maintained infrastructure. They elected them based on what they would do with public education funding. They elected them based on how they would manage tax rates. They elected them based upon whether they'd cut services or take issue loans for maintaining current accounts. They elected them based on how they dealt with corporations--incentives, taxes, etc., etc.
If the campaign promises and thinking that got the politicians elected constitute mismanagement, then, I'm sorry, the electorate *did* elect the politicians to mismanage. The people may have the power to elect, but that doesn't mean they are all-wise.
Detroit's been in the news in the last few years for issues that involve a lot of bad management. Usually the public has been firmly on the side of mismanagement, and when arguing for practices that spent money needlessly nobody was thinking about the retirees and their pensions.
BTW, in 2008 money was destroyed. Take my house.
2006: bought for $125k. Builder got the money, family got the debt and the house, bank got an IOU with interest and a lien on the house.
2007: house valued at $146k. Family took out a loan for $10k. Family got the money, a different bank got an IOU with interest and a second lien on the house.
2008. house was foreclosed on. Banks got $80k or so, losing 135k or more in the process. REI got the house.
2009 we bought the house for $100k. REI got the money, bank got an IOU, we got the house.
Since then we've paid our mortgage.
2012 current appraisal is $90k for the house but we're not underwater.
Notice who got the "money". The builder got $120k. The REI got $20k. The family got $10k and a load of debt--don't know what happened to that debt for them. I suspect they declared bankruptcy and the banks lost $55k. But if you "follow the money" you'll see that $16k of the house's value simply vanished for the first family--it came from nowhere and vanished to nowhere. Unrealized capital gains, followed by unrealized capital losses. $10k vanished since we bought the house. That's an unrealized capital loss, and it's not "real" until we sell.
However, while that's an unrealized capital loss it still counts as wealth. In 2008 "money"--wealth--was seriously destroyed. Those who got the money typically weren't the banks but whoever sold the houses. Builders made out like bandits. So did those who flipped houses before the bubble burst. Those left holding them saw their property values drop, but had no real loss in money until they sold (which is why a lot of people refused to move).
Civilization2
(649 posts)I don't assume a pot of money, I see shady deals where money goes to friends, family, and business partners for work never done or vastly overpaid for. I see the city taking loans from private for-profit banksters for this type of work, that commits the taxpayers to eternal interest payments for perpetuity. And I see all this as unnecessary and in fact hostile to the taxpayers of the city.
Lets look at your long list of "reasons people voted" for a candidate. It is impossible that anyone could find a single candidate to vote for that took all the same positions as they would. Hence the 'lesser of two evils' cliche we hear every time there is an election. You have to take a compromise, and no candidate is ever clear on the positions they will take in the years AFTER the election. I just see the voting for a candidate who then has a four year run of 'dictatorship', with voters then responsible for the officials actions, as a rather weak example of "democracy".
As far as the devaluing of homes, no real wealth was destroyed, only casino chips and illusory value used to keep people playing the mortgage game. It was just another pyramid bubble scam. The entire monetary system is another such pyramid scam, there should be no inflation, governments should not have to pay interest to private for-profit banksters. We can have an interest free and inflation free monetary system,. we only need to change from the rigged game we have been forced to accept.
Real wealth has nothing to do with money. Money is a tool used be the 1% to maintain power and control. When money is debt, and debt demands interest, the people are made into slaves for the 1% to exploit. Banksters do nothing to create wealth or value, the have merely claimed control over the creation of money. This is the source of their power and our struggles.
There are alternatives; Slow Money, Degrowth, Permaculture, Relocalization, etc.
Demeter
(85,373 posts)Since the STATE screwed over Detroit for 60 years.
hack89
(39,171 posts)Ash_F
(5,861 posts)Left Coast2020
(2,397 posts)But I can say this. We're going to have to bust our asses to get this POS out. That is the bottom. Snyder has, IMO, or may be circumventing existing laws to prevent this stuff from happening in the first place. Mich. does not deserve this. Its not their fault. He is trying to destroy an entire state city-by-city. You can't allow him to get away with this. RECALL HIS ASS!. Do whatever it takes to send him to Siberia.
dusty trails
(174 posts)Is a bankruptcy a bailout?
underpants
(182,818 posts)bankruptcy is forgiveness of debt - this is normal matter of business for many levels of business. Note - individuals can no longer declare bankruptcy fully and student loans were NEVER allowable.
Bailout is someone giving someone cash to do with what they want. Pay off debt? Maybe but not necessarily.
Gidney N Cloyd
(19,838 posts)As the Pythons might say, "Oh what a giveaway!"
You could almost see dollar signs in his eyes as he mentioned it. It's something that probably needs doing to some extent but it's got nothing to do with the immediate emergency!
DonCoquixote
(13,616 posts)then Detroit, a white power structure takes advantage of a crisis to declare war on the inhabitants. New Orleans resisisted, but it will be sad if Billionaires can do with Lawyers what Katrina failed to do.
Sen. Walter Sobchak
(8,692 posts)Detroit will never again have the population or tax base to carry its debt load, kicking the land mine down the road a few years doesn't really accomplish anything. And other than Aloha Motherfuckers Airport what major infrastructure does Detroit have to sell off that anyone in the private sector would conceivably want?
I bet Veolia Environnement is rubbing their hands with glee at the thoughts of getting their hands on Detroit Water and Sewerage that has been under temporary federal management for decades on end.
Yo_Mama
(8,303 posts)First, in a Chapter 9 the bankruptcy judge explicitly does not have the power to force the municipality to sell assets.
You can read that here in the Court's Limited Power section:
Sections 903 and 904 of the Bankruptcy Code are designed to recognize the court's limited power over operations of the debtor.
Section 904 limits the power of the bankruptcy court to "interfere with (1) any of the political or governmental powers of the debtor; (2) any of the property or revenues of the debtor; or (3) the debtor's use or enjoyment of any income-producing property" unless the debtor consents or the plan so provides. The provision makes it clear that the debtor's day-to-day activities are not subject to court approval and that the debtor may borrow money without court authority. In addition, the court cannot appoint a trustee (except for limited purposes specified in 11 U.S.C. § 926(a)) and cannot convert the case to a liquidation proceeding.
The court also cannot interfere with the operations of the debtor or with the debtor's use of its property and revenues. This is due, at least in part, to the fact that in a chapter 9 case, there is no property of the estate and thus no estate to administer. 11 U.S.C. § 902(1). Moreover, a chapter 9 debtor may employ professionals without court approval, and the only court review of fees is in the context of plan confirmation, when the court determines the reasonableness of the fees.
The restrictions imposed by 11 U.S.C. § 904 are necessary to ensure the constitutionality of chapter 9 and to avoid the possibility that the court might substitute its control over the political or governmental affairs or property of the debtor for that of the state and the elected officials of the municipality.
Similarly, 11 U.S.C. § 903 states that "chapter [9] does not limit or impair the power of a State to control, by legislation or otherwise, a municipality of or in such State in the exercise of the political or governmental powers of the municipality, including expenditures for such exercise," with two exceptions a state law prescribing a method of composition of municipal debt does not bind any non-consenting creditor, nor does any judgment entered under such state law bind a nonconsenting creditor.
It's true that some contractual claims may be adjusted, but not unreasonably and not in conflict with state law. It is true in all bankruptcy cases, however, that where the money to pay an obligation does not exist, that obligation may be legally set aside in whole or in part. But the role of the judge is to see that the plan is reasonable, does not conflict with state law, etc, etc.
The BK filing, if it is upheld, will allow Detroit to stop paying on its general obligation bonds:
Different types of bonds receive different treatment in municipal bankruptcy cases. General obligation bonds are treated as general debt in the chapter 9 case. The municipality is not required to make payments of either principal or interest on account of such bonds during the case. The obligations created by general obligation bonds are subject to negotiation and possible restructuring under the plan of adjustment.
Special revenue bonds, by contrast, will continue to be secured and serviced during the pendency of the chapter 9 case through continuing application and payment of ongoing special revenues. 11 U.S.C. § 928. Holders of special revenue bonds can expect to receive payment on such bonds during the chapter 9 case if special revenues are available. The application of pledged special revenues to indebtedness secured by such revenues is not stayed as long as the pledge is consistent with 11 U.S.C. § 928 [§ 922(d) erroneously refers to § 927 rather than § 928], which ensures that a lien of special revenues is subordinate to the operating expenses of the project or system from which the revenues are derived. 11 U.S.C. § 922(d).
Bondholders generally do not have to worry about the threat of preference liability with respect to any prepetition payments on account of bonds or notes, whether special revenue or general obligations. Any transfer of the municipal debtor's property to a noteholder or bondholder on account of a note or bond cannot be avoided as a preference, i.e., as an unauthorized payment to a creditor made while the debtor was insolvent. 11 U.S.C. § 926(b).
The pensioners have the right to be heard and to present their claims.
brentspeak
(18,290 posts)A formality before their claims eventually get denied. Looks like you're wrong.
http://www.usatoday.com/story/news/nation/2013/07/18/questions-and-answers-detroits-chapter-9-bankruptcy/2567131/
Q: Will retiree pensions be reduced?
A: Most likely yes, but how much is unknown now. Unions say the state Constitution protects public pensions as a "contractual obligation" that "shall not be diminished or impaired." But Orr and other bankruptcy experts believe federal bankruptcy law, which allows contracts to be slashed or voided, will preempt the state Constitution. Current employee pensions could be frozen or reduced, too.
Q: Will retiree health care be affected?
A: Yes. Orr has proposed ending city-funded health care plans for retirees. He wants retirees to shift to Medicare or the exchanges that are being created under the Affordable Care Act.
Rich people, salivating for Detroit's museum assets:
Of Course Detroit Should Sell The Paintings
Tim Worstall, Contributor
Forbes
Theres some confused thinking over whether Detroit, now that its bankrupt, should sell some of the paintings in the City Museum. My answer is that yes, of course it should sell them: doing so would be the very definition of wealth creation. For moving something to where it has a higher value is that definition of wealth creation...
MrScorpio
(73,631 posts)No surprise there.
daleo
(21,317 posts)Basically, that's the message of recent history.
Nye Bevan
(25,406 posts)daleo
(21,317 posts)Pension plans for regular folks get written off as greedy retiree money, rather than obligations owed to people who put their life's energies into an organization.