Detroit pension protesters offer own bankruptcy plan, vow to shut city down
Source: Detroit Free Press
Shouting "No peace -- no justice," leaders of a planned protest this Sunday against the City of Detroit's tentative bankruptcy settlement gathered in a city church today and promised they would "shut the city down."
Leaders said a plan of adjustment announced last week that would slash some city pensions by 34% was unacceptable and racist. They submitted to the bankruptcy judge their own "People's Plan for Restructuring Toward a Sustainable Detroit," a 10-page document showing how Detroit's crisis could be resolved without hurting city retirees and residents, they said.
Short answer: Big banks and bondholders should accept losses, said Cecily McClellan, 61, a Detroiter and city health department retiree. Applauding and shouting approval as McClellan spoke were about three dozen people gathered at Historic King Solomon Baptist Church.
Read more: http://m.freep.com/localnews/article?a=2014302240125&f=1232
24601
(3,962 posts)recovery. They will look elsewhere if Detroit demonstrates it's bonds are unsafe investments.
I've been trying to explain this very concept to many of my friends. I feel extremely bad for all the pensioners but the fact is the city suffered huge tax base losses over the last 30 years and can no longer support it's obligations. As they say, you can't squeeze blood from a stone. You also can't squeeze money out of someone that doesn't have any.
Also, IIRC the bond holders are taking a significant cut as well.
JDPriestly
(57,936 posts)A debtor who has not declared bankruptcy and has lots of creditors who will precede all new creditors? After all, the money owed to the first source from which the city borrowed will be paid before a Johnny-Come-Lately, I should think.
Or wouldn't you prefer to loan to
A debtor like Detroit who has a steady source of income - tax income - which, although lower than its past income can be used to pay off new debt and who has recently wiped its debts clean in bankruptcy court? I don't know how long it will take for Detroit to be discharged in bankruptcy. But once it has been, I know of no reason to think that it will be a better risk than it is now.
bemildred
(90,061 posts)hack89
(39,171 posts)there is no city in America that does not use bonds to fund capital improvements.
bemildred
(90,061 posts)We can make them whole any time we like.
hack89
(39,171 posts)of how the government created money out of thin air to make a bankrupt city or state whole again.
bemildred
(90,061 posts)They mark a number down on the debt ledger, and they give that much as a credit to a bank. Absolutely nothing physical involved except some tiny magnetic spots somewhere in some computer system. It's even cheaper than printing. They could do the same for Detroit tomorrow.
hack89
(39,171 posts)You realize that the Fed does not control currency levels in America by simply creating money out of thin air?
1. A change in reserve requirements
2. A change in the discount rate
3. Open-market operations
A change in reserve ratio is seldom used but is potentially very powerful. The reserve ratio is the percentage of reserves a bank is required to hold against deposits.A decrease in the ratio will allow the bank to lend more, thereby increasing the supply of money. An increase in the ratio will have the opposite effect. (Read more on this subject in Breaking Down The Fed Model.)
The discount rate is the interest rate that the central bank charges commercial banks that need to borrow additional reserves. It is an administered interest rate set by the Fed, not a market rate; therefore, much of its importance stems from the signal the Fed is sending to the financial markets (if it's low, the Fed wants to encourage spending and vice versa). As a result, short-term market interest rates tend to follow its movement. If the Fed wants to give banks more reserves, it can reduce the interest rate that it charges, thereby tempting banks to borrow more. Alternatively, it can soak up reserves by raising its rate and persuading the banks to reduce borrowing.
Open-market operations consist of the buying and selling of government securities by the Fed. If the Fed buys back issued securities (such as Treasury bills) from large banks and securities dealers, it increases the money supply in the hands of the public. Conversely, the money supply decreases when the Fed sells a security. Note that the terms "purchase" and "sell" refer to actions of the Fed, not the public. For example, an open-market purchase means the Fed is buying but the public is selling. Actually, the Fed carries out open-market operations only with the nation's largest securities dealers and banks, and not with the general public. In the case of an open-market purchase of securities by the Fed, it is more realistic for the seller of the securities to receive a check drawn on the Fed itself. When the seller deposits it in his or her bank, the bank is automatically granted an increased reserve balance with the Fed. Thus, the new reserves can be used to support additional loans. Through this process, the money supply increases.
http://www.investopedia.com/articles/08/fight-recession.asp
bemildred
(90,061 posts)That's why there is a Fed. It was considered too dangerous to allow the government to print money by itself without banks involved. Boy was that a mistake.
hack89
(39,171 posts)bemildred
(90,061 posts)Fantastic Anarchist
(7,309 posts)bemildred
(90,061 posts)bemildred
(90,061 posts)hack89
(39,171 posts)creditors that stiff lenders don't get credit anymore - not worth the risk. Where is the money going to come from?
bemildred
(90,061 posts)hack89
(39,171 posts)a simple question.
bemildred
(90,061 posts)hack89
(39,171 posts)how do you think cities fund infrastructure improvements and other capital intensive projects? There is a reason most municipal bonds are tax free - cities and towns are absolutely dependent on them.
bemildred
(90,061 posts)hack89
(39,171 posts)24601
(3,962 posts)The Pension Benefit Guarantee Company isn't covering any of this since it applies to private plans only.
http://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corporation
Demeter
(85,373 posts)What they need to do is shut down the banks. Since the banks shut them down, it's only fair to turn the tables.
bossy22
(3,547 posts)bemildred
(90,061 posts)hack89
(39,171 posts)They were not competent enough to make financially sound decisions?
bemildred
(90,061 posts)hack89
(39,171 posts)we will never get good governance if our leaders are not held responsible for their actions.
bemildred
(90,061 posts)Demeter
(85,373 posts)alp227
(32,026 posts)hack89
(39,171 posts)melm00se
(4,993 posts)a link (a balanced one) that discusses who is giving up what during the bankruptcy proceedings?