Detroit bankruptcy: Governor authorizes filing, declaring 'no viable alternative' (+video)
http://www.csmonitor.com/USA/2013/0718/Detroit-bankruptcy-Governor-authorizes-filing-declaring-no-viable-alternative-video
The Detroit bankruptcy filing, which follows a decades-long decline
in city finances that led to $18 billion in debt, sets the stage for a
showdown with 43 public sector unions facing a drastic cut in pensions.
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| http://www.bookerrising.net/2010/07/black-lawmakers-irate-over-rahm.html |
One day after Detroit’s Emergency Manager announced that city administrators were filing a petition to declare bankruptcy, a Michigan court has ordered that it be withdrawn, citing a violation of the state's constitution.
The Chapter 9 filing on Thursday, which makes Detroit the largest city in American history to file for bankruptcy, led to a dump of city bonds by investors who remained skittish despite reassurances made by Michigan Governor Rick Snyder and Detroit's Emergency Manager Kevyn Orr, reports Reuters.
Lawsuits have already been filed in response to the bankruptcy bid, and Ingham County Circuit Court Judge Rosemarie Aquilina ruled on Friday that the process must be halted.
“I have some very serious concerns because there was this rush to bankruptcy court that didn’t have to occur and shouldn’t have occurred,” said Judge Rosemarie Aquilina.
Governor Snyder lacks the power to "diminish or impair pension benefits," according to the ruling by Judge Aquilina.
Orr, who was appointed by Snyder in March to try and resolve the city's financial crisis, had said in June that the chances of bankruptcy for Detroit were 50-50.
Seemingly unable to strike a deal with the city’s creditors to tackle Detroit’s $18.5 billion in long-term debt, Orr acknowledged that court battles over the need for a bankruptcy filing could be protracted and difficult, while also setting the seemingly ambitious goal of concluding the bankruptcy process no later than September 2014.
"I've got 15 months left on my tenure. I promised the governor that we were going to try and get this done within the time frame provided by the statute," said Orr.
Bankruptcy experts cited by Reuters, however, expect the bankruptcy court case could last years and cost tens of millions of dollars.
The first test in the city's Chapter 9 proceeding will be whether Detroit has explored other reasonable options before filing, and the city will "have an eligibility fight, I suspect" over that qualification, Orr said.
Orr met with over 180 bond insurers, pension trustees, union representatives and an assortment of creditors in June and asked them to accept about 10 cents on the dollar for the city’s debt, reports the AP.
The White House meanwhile appeared to be closely watching the bankruptcy proceedings.
On Friday, Judge Aquilina said she intended to keep the administration informed regarding matters affecting pensions by sending her rulings in the state cases directly to US President Barack Obama, according to her law clerk, as well as attorney William Wertheimer, who is representing retirees in a lawsuit.
Detroit had for years relied on borrowing and deferred payments to its pension funds to keep the city afloat, said Orr.
Fannie and Freddie, Not Financial Sector to Blame>>Fannie and Freddie, Not Financial Sector to Blame
Corruption, Ineptness and Duplicity — The Description of Washington, DC
For anyone still under the delusion that the government is actually a neutral referee or that we will get out of this crisis in any reasonable time or manner, the following is an absolute must-read.
The financial sector has been the scapegoat for much of our economic problems. They are hardly innocent and probably are a key part of the oligarchy that run the country. It would be nice if we saw criminal investigations into their activities which would result in many going to jail. That will not happen because it would implicate too many politicians and/or cut off their cash supply.
Now we have indications that the role of the financial sector may have been smaller than first assumed. Not that they are innocent by any means, but that the crisis could not have attained anywhere near the size it did without direct complicity by government agencies, specifically the GSEs. An investigation here is not likely either because it would be even more dangerous to the politicians involved.
Based on the allegations of Edward Pinto as reported in the Wall Street Journal, Zerohedge concludes:
“… it seems almost beyond question that the policies (or policy malfeasance) of Fannie and Freddie, and not the actions of large banks or firms like AIG are the proximate cause of not just the credit crisis, but also the continuing multi-act, multi-bailout farce that continues to be passed off to the public as necessary ’stimulus’.”
Below is the entire Zerohedge post by Marla Singer and some amazing claims and observations (emboldening added):
Origins of an American Kleptocracy
Submitted by Marla Singer on 01/01/2010 22:20 -0500
Some days ago we wondered aloud at the blank check extended to Fannie and Freddie along with the suspiciously convenient timing of those announcements on Christmas Day. Back then we wondered if we had been told the entire story. To wit:So. Let us summarize:
We do not expect the GSEs to grow their portfolios at all, so we are fixing the bloated portfolio problem by easing the portfolio caps to permit a quarter trillion dollar expansion thereof.
We do not expect either of the GSEs to need more help from the Treasury, so we are responding to the underutilized $400 billion “lifeline” the GSEs have with the Treasury ($111 of which is currently used) by expanding it to… infinity.
Oh, and though they have collectively lost nearly $200 billion, we are paying the CEOs around $6 million each.
Great work team! It’s already almost 11:00. Let’s go to lunch.The other shoe having now dropped, Bloomberg has joined in our skepticism:
Taxpayer losses from supporting Fannie Mae and Freddie Mac will top $400 billion, according to Peter Wallison, a former general counsel at the Treasury who is now a fellow at the American Enterprise Institute.
“The situation is they are losing gobs of money, up to $400 billion in mortgages,” Wallison said in a Bloomberg Television interview. The Treasury Department recognized last week that losses will be more than $400 billion when it raised its limit on federal support for the two government-sponsored enterprises, he said.Wallison continues:
“It was always safe to buy these notes,” he said. The U.S. government was always going to stand behind them. They’re as good as Treasury notes.”We are no longer sure this is the most inspiring comparison. Wallison also chimes in via the Wall Street Journal and points to a darker vein shot through the GSE story:
New research by Edward Pinto, a former chief credit officer for Fannie Mae and a housing expert, has found that from the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A.
In general, a subprime mortgage refers to the credit of the borrower. A FICO score of less than 660 is the dividing line between prime and subprime, but Fannie and Freddie were reporting these mortgages as prime, according to Mr. Pinto. Fannie has admitted this in a third-quarter 10-Q report in 2008.It has become conventional wisdom, perhaps even cliche, to pin the origins of the credit crisis on the big banks or, AIG or even the practice of financial modeling. Certainly, these actors have received the most play in the media, and have now endured the focus of populist ire for more than a year. We now think that the analysis leading commentators to focus blame on these entities is fatally flawed.
But because of Fannie and Freddie’s mislabeling, there were millions more high-risk loans outstanding. That meant default rates as well as the actual losses after foreclosure were going to be outside all prior experience. When these rates began to show up early in 2007, it was apparent something was seriously wrong with assumptions on which AAA ratings had been based.
Losses, it was now certain, would invade the AAA tranches of the mortgage-backed securities outstanding. Investors, having lost confidence in the ratings, fled the MBS market and ultimately the market for all asset-backed securities. They have not yet returned.
... This is equally trivial to find given that this precise mandate has been the express purpose of the GSEs since at least 1993 ...
... >> If, as Pinto suggests, we add purposeful misrepresentation of underlying collateral to the mix three things become apparent:
First, absent some intervening criminal act by actors farther downstream (and we may yet find some), we have isolated absolutely the cause of all that followed.
Second, it becomes quite easy to construct a criminal case for literally millions of counts of accounting, securities, wire and mail fraud against the GSEs. To the extent executives at Fannie and Freddie signed off on financial statements disclosing the portion of their balance sheets that held “AAA” securities and these had been purposefully misidentified we should be exploring prosecution for violations under e.g., Sarbanes-Oxley. (Given, however, Rham Emanuel’s involvement in Freddie and Fannie, we aren’t holding our breath).
Third, given the presence of blatant government price fixing in more than a third of the entire economy, the United States hasn’t been anything like a “free market” since before 2003.
CONTINUE >>http://mises.org/community/blogs/montypelerin/archive/2010/01/03/fannie-and-freddie-not-financial-sector-to-blame.aspxIt should shock you that literally a third of the U.S. economy should become a playground for the social experiments of any political group of any party affiliation.
[SIDEBAR: GOLDMAN SACHS MANAGED-MANAGES ~ALL~ PUBLIC EMPLOYEES' RETIREMENT PORTFOLIOS. BANKRUPT MUNICIPALS, CITIES, STATES, BELONG TO GS UNLESS THE 'DUE PROCESS LAW' IS RETURNED AS SIMPLE CONTRACT TRUTH IN JUSTICE IN THE REALITY OF 'TWENTY-FIRST CENTURY' FOR THE SAKE OF COMMON SENSE DIGITAL TIME! AND IN EVERY STATE IN THE US THE QUADZILLIONS PAID TO GS, TIM GEITHNER, RAHM ISRAEL EMANUEL ET AL VIA 'OBAMA' ~ OBVIOUSLY EVERY STATE NEEDS TO 'NEGOTIATE' WITH FANNIE-FREDDIE-OBAMA-RAHM-ISRAEL-ET-AL].
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