Detroit Files for Bankruptcy.

the Streif

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Detroit files for bankruptcy

By Chris Isidore @CNNMoney July 18, 2013: 4:44 PM ET

Protestors in Detroit last month objected to plans to cut pension benefits of city workers and retirees.
NEW YORK (CNNMoney)
Detroit filed for bankruptcy Thursday afternoon, becoming the nation's largest public sector bankruptcy. The move could slash pension benefits to city workers and retirees, and leave investors holding the city's debt with only pennies on the dollar.

Emergency Manager Kevyn Orr, appointed by Michigan Gov. Rick Snyder to oversee the city's finances, had been holding meetings with various creditors for the last five weeks in an effort to shed debt that the city can no longer afford. But despite the fact that some banks agreed to take reduced payments, Orr sought and received permission from Snyder to file.
Pension funds and retirees who fear deep cuts in promised benefits had filed suits to try to block a filing. Thursday's filing came before a hearing on the suits that was set for Monday.
Orr already halted payments on about $2 billion in debt last month, saying the city needed to preserve its dwindling supply of cash. His reorganization plan calls for cutting $11.5 billion in unsecured debt -- including pensions, health care funds and loans not backed by assets -- down to $2 billion. That would mean that investors and retirees would receive an average of just 17% of what they are owed. Specific plans for the cuts are unknown at this time.
Related: City of Detroit is financially 'insolvent'
Cutting retiree's pensions in a municipal bankruptcy has never been done before, said Michael Sweet, a California bankruptcy attorney who is an expert in public sector bankruptcies.
"It's relatively easy to blow off a creditor. It's much harder when it's people who are the fabric of your community who you'll need going forward," he said. "You need a police force, you need a fire department. You're saying [to them] you're not worth what you were previously promised."
Sweet said case law on whether pensions can be cut this way is very limited, and it could take years for a court fight over pension cuts to work its way to the U.S. Supreme Court. Given the poor state of funding for many public sector pension funds nationwide, "it's a big enough question, that (the Supreme Court) is where it likely will have to go," he said.
Related: Detroit halts debt payments, plans pension cuts
When employees of a bankrupt business lose their promised pensions, the Pension Benefit Guarantee Corp. steps in and provides a minimal level of benefits to the retirees. But that federal agency doesn't back pensions in the pubic sector.
Snyder spokeswoman Sara Wurfel said the decision to file for bankruptcy came after careful deliberation.
"This has been a huge problem for decades and it's come to a crisis point," she said. "The emergency manager tried to work with all the creditors, including pensioners."
Retirees and city employees say they can't accept cuts in their pension benefits.
"How am I supposed to live without my pension?" said David Sole, 65, after a protest in Detroit last month. Sole retired from the city's water department in January after 22 years.
Investors say the bankruptcy will make it more difficult for cities and towns everywhere to raise the money they need to build bridges, schools and other infrastructure. It will also hurt municipal bonds held by individual investors. There are more than $1 trillion worth of these general obligation bonds issued by local governments that are at risk said Peter Hayes, head of municipal bonds at BlackRock. He said there will be a ripple effect nationwide.

Detroit may sell its art treasures
Orr said that the city needs to cut debt in order to restore services and lower costs, such as taxes and insurance,
Who saw this coming?:rolleyes:

http://money.cnn.com/2013/07/18/news/economy/detroit-bankruptcy/index.html
 

Norm Stansfield

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#2
Sweet said case law on whether pensions can be cut this way is very limited, and it could take years for a court fight over pension cuts to work its way to the U.S. Supreme Court. Given the poor state of funding for many public sector pension funds nationwide, "it's a big enough question, that (the Supreme Court) is where it likely will have to go," he said.
As if not cutting those pensions is an actual option. There's no reason for the Supreme Court to tell these people that the money they were promised doesn't exist. It would be like asking the Supreme Court to rule that water is wet. We just don't know whether water is wet. There's not enough case law on that, your honors, please help us out and tell us.
 

Neckbeard

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NAGGERS GONNA ANNOY YOU.
 

DanaReevesLungs

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#5
So, wait, you mean spending more than the revenue that comes in can lead to bankruptcy? Why color me shocked.
 

Neckbeard

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#7
The racist emergency manager? A black man CEO, by the way. RAYCISS.
 

freddyfox

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#9
This is gonna be fun. So now two pension fund boards are gonna sue the city of Detroit.

http://www.freep.com/article/20130718/NEWS01/307180125/

So Detroit gave banks several billion dollars to invest. Those banks then proceeded to toss the money into volatile investments known as derivatives/credit default swaps. Detroit lost its ass on these investments. Union pensions won't take anything less than 100%. They'd rather see the whole ship go down than restructure pension plans. Here's a list of Detroit's creditors:

http://www.freep.com/article/20130718/NEWS01/307180122/Emergency-manager-Detroit-creditors-Kevyn-Orr

It would be a huge waste of money for our government to bail out Detroit since Detroit doesn't have a tax base proportionate to its liabilities. Detroit would just be "in the red" again next year.
 

jnoble

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#10
It would be a hoot if they changed the state motto to "Michigan: The Gibsmedat State" or "Detroit: We broke, nigga!" :haha7:
 

f kane

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#12
Media and pundits blaming it on Republicans in 3 2 1...
 

jnoble

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#13
Media and pundits blaming it on Republicans in 3 2 1...

(angry typing guy voice) YOU KNOW...IF THE RICH WERE PAYING THEIR FAIR SHARE AND THE GREEDY BANKERS AND WALL STREET AND BUSH'S TWO ILLEGAL WARS THAT WEREN'T PAYED FOR.... (angry typing guy voice)
 

jnoble

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#14
When I first got interested in politics years ago and read Rush's first book, something he pointed out is totally true: The ONLY time you EVER hear liberal Democrats and the media whine "how can we afford it?" is either proposed tax cuts or funding to a military action. That's it. Jus those two things.You will never ever hear "can we afford it?" concerning anything else. Especially if it's supposedly to help the children or "the poor" or the motherfucking environment
 

Atomic Fireball

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#15
but but but it's the red states that get all the federal dollars
 

mrbucket75

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#16
How about cities becoming responsible for extended costs on employees. Most people nowadays have to work until they cant. Money income on most cities cant pay for extended benefits and retirement on employees. Time to start being responsible and just be honest about the future.
 

weeniewawa

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May 21, 2005
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#17
socialists have been running this city for 50 years and banking their whole roll on the auto industry

the unions killed GM and Chrysler and now killed detroit

that town along with shitcago need a good nuking
 

DrewDown

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#18
Now how the fuck do we 'pose to keep peace?
 

Ballbuster1

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#22
What a shock. They give out overpriced salaries and pensions in
a city full of non-taxpayers and they're broke. Who saw that one
coming besides everyone but the city council and the employees
who were in line for those salaries and pensions?

And of course the non-taxpayers since they don't pay shit and most
likely have a friend or relative that will benefit from this shit.
 

Ego

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#23
Is it possible for a city to have its charter revoked in this day and age? Their shitty management system has led to this, and they deserve to be written out of existence.
 

Begbie

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#24
The Great Decline of Detroit has been going on for years. Wasn't it at one point, a city of 1.8M residents? So on one hand, you've got plummeting population, to the tune of 1.1M people over decades. And on the other, you have a corrupt, ultra liberal city government that has spent decades trying to spend their way out of debt. You've got the working class moving out of city limits, and the gibmedats moving in/staying.

This certainly should come as no surprise to anyone.

Clearly, these city leaders have never played SimCity.
 

gleet

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#25
Lucky the city has a local resource to raise all the quick cash they could ever need.