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Wed Jun 19, 2013, 02:37 PM

 

Unelected Emergency Manager Set To Break Detroit’s Pension Promises [View all]

Rick Cooley ‏@rcooley123

Unelected Emergency Manager Set To Break Detroit’s Pension Promises
http://thinkprogress.org/economy/2013/06/18/2174741/detroit-pension-bankruptcy/


Detroit’s unelected “emergency manager” wants to stiff the city’s pensioners while repaying the large financial firms that hold the city’s debts. Emergency manager Kevyn Orr unveiled the plan last Friday while announcing that the city is unable to pay its current debts.

The proposal asserts that the funding gap for Detroit’s pension obligations is five times wider than previously thought, at $3.5 billion rather than the $644 million estimated in 2011. Reuters reporter Cate Long dug into the numbers and came up skeptical: “Orr is going to have to show math that demonstrates the pension funds are so massively underfunded,” Long wrote, calling the pensions “reasonably well-funded according to national standards.”

But regardless of the validity of Orr’s numbers, the proposal appears designed to facilitate a bankruptcy filing. Once in bankruptcy court, Orr would no longer need public workers’ unions to sign off on a plan to renege on pension promises. Michael VanOverbeke, a lawyer for the pension fund, explained the basic unfairness of prioritizing investors over retirees: Where bond investments carry “a certain amount of risk,” he told the New York Times, “[p]lanning for retirement and working for employers was not an investment in the market. These are people who are on a fixed income…they can’t go back to work and start all over again.”

Elsewhere, Orr’s report summarizes the barely-functioning state of the Motor City: 40 percent of its street lights are dark, two-thirds of its ambulances are out of service, and 78,000 buildings stand empty. How did Detroit get here? The fundamentals of the city’s economy declined along with the U.S. auto industry, but ill-considered debt schemes and manipulation by big international banks exacerbated the problem. Convicted former mayor Kwame Kilpatrick oversaw huge loans that went bad, including billions of dollars in the interest rate gambles known as “swaps.” But banks were rigging the rates that determine who wins and who loses on interest rate swaps like Detroit’s, as last year’s LIBOR scandal revealed. The city paid nearly half a billion dollars in fees to Wall Street firms for engineering the swaps and other financing schemes that only deepened Detroit’s debt hole.

("emergency manager" law is made by Michigan's governor Rick Snyder who is a stealth "tea party" politician. The Koch brothers co-created the "tea party" along with big tobacco, so they are directly responsible and profit directly from this all-together purposeful smash-and-grab. It's vulture capitalism per the movie "Wall Street".)

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Reply Unelected Emergency Manager Set To Break Detroit’s Pension Promises [View all]
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