If this stands – and it HAS already been appealed – this is, um, Things Go Boom Time.
U.S. Bankruptcy Judge Steven Rhodes ruled today that pensions of city retirees can legally be cut in Detroit’s bankruptcy — a decision that came as a significant surprise to people observing the case.
Rhodes emphasized he won’t necessarily allow pension cuts to be approved in the city’s final reorganization plan, called a “plan of adjustment.”
Rhodes previously signaled that he planned to decide the issue of whether the pensions can be cut later in the case. But today he said he changed his mind and decided ruling on the issue now would expedite the bankruptcy.
Lawyers representing pensioners and two city pension funds got an emergency hearing Thursday with Aquilina, and she said she planned to issue an order to block the bankruptcy filing. But lawyers and the judge learned that Orr filed the Detroit bankruptcy petition in Detroit 5 minutes before the hearing began.
Aquilina said the Michigan Constitution prohibits actions that will lessen the pension benefits of public employees, including those in the City of Detroit.
Deeper and deeper in its gathered regret The city cannot bear its crushing debt; Things fall apart; Blue Models cannot stand; Smith’s virtuous Fist is loosed upon the land, The bankruptcy is loosed, and everywhere The solvency of proud Detroit is drowned; The Left lacked all competence, while the Right Was kept away, per standard policy.
Surely some intervention is at hand; Surely the Administration is at hand. The Administration! Hardly are those words out When a vast image out of Dreams of my Father Troubles my sight: somewhere in sands of Hawaii A boy with careless spirit and the age of a man, A gaze blank and indifferent as a mask, Is savoring slow puffs, while all about him Lurk shadows of soft-bigoted sycophants. The image fades again; but now I know That Motown’s century of reckless deeds Have spawned a nightmare that walks, with bill in hand, And what rough beast, its hour come round at last, Slouches towards Michigan to be born?
[Detroit Emergency Manager Kevyn] Orr on Friday sat down in a closed-door meeting with about 150 creditors, bond holders and unions to discuss the city’s fiscal situation, seeking concessions that would save Detroit millions of dollars in payments.
Perhaps the most dramatic aspect of his plan: Orr said, starting now, there will be a moratorium on debt payments for all unsecured funded debt. Creditors are being asked to take about 10 cents on the dollar of what’s owed them. Underfunded pension claims would get less.
This is my only comment – well, aside from the one where I note that Detroit should take another look at that zombie plan that I suggested a while back – but it’s a doozy: those underfunded claims that I bolded, if I am reading this correctly, represent 3.5 billion dollars’ worth of debt. The Emergency Manager is stating outright that at least 3 billion of that is going to be defaulted on. Now, I am a rank amateur at many aspects of public policy and all that, but I suspect that this will end up having adverse effects on the local economy, no?
I’m telling you, again: it’s already post-apocalypse, over there. They might as well just admit it.
A review team assigned by the state of Michigan declared Tuesday that the city of Detroit is in a state of “Final Emergency.”
This once booming city that thrived on the American automobile industry is on the verge of bankruptcy after a long and tumultuous economic decline. Gov. Rick Snyder will now have the green light to go ahead with Michigan’s emergency manager law, which calls to appoint a manager to financially struggling local governments of the state. Based on the law’s unsuccessful history, Gov. Snyder may have some difficult days ahead in hopes of saving Detroit.
Like Glenn Reynolds, I’m sure that there are all sorts of reasons that argue against this Volokh Conspiracy commenter’s position that if we do allow states to go bankrupt then we should also require them to lose their state status and be bounced back down to territorial status again. But the idea of taking say, California, yanking it out of statehood for ten years… then readmitting it as the three or so states that it should be appeals.
Hoo, boy, yes, it appeals.
PS: Texas should also probably be about three states or so, but Texas is also not in imminent danger of default.
…which is the worried reaction from a Lefty blogger who can’t quite understand why Barney Frank, head of the House Financial Services Committee, would say anything like the below in response to the way that the bankruptcy bill got shot down in the Senate (if only temporarily):
The reason that he said something like that, of course, is because the Democratic party is not the ‘party of inclusion:’ it’s the ‘party of expedience.’ The leadership (which is somewhat more liberal than its current Congressional roster, and very much more so than the rank and file) have been throwing this inclusion line around, with admittedly some success: but they have no intention of actually living up to it. Continue reading Barney Frank and the ‘Big Tent.’