Detroit's Bankruptcy Is Just Politics By Other Means - page 2
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A Judge Tries to Hit Rewind on Detroit's Bankruptcy Filing
Less than a day after Detroit’s pension funds narrowly missed a chance to stop the city from filing for bankruptcy, the city’s retirees scored a victory in state court. Typically, once a party files for bankruptcy, the case moves into federal jurisdiction and can’t be touched by state courts. But today a Michigan court judge ordered Governor Rick Snyder to direct the city’s emergency manager, Kevyn Orr, to withdraw the bankruptcy filing. The judge’s order also prevents Orr from submitting any future filings that would reduce pension benefits. The state is appealing the ruling and wants a temporary stay that would allow the bankruptcy to continue during the appeal.
“This has never happened in the history of our country,” says Chuck Tatelbaum, a lawyer at Hinshaw & Culbertson who has represented lenders in other municipal bankruptcies but is not involved with Detroit. He says that if the state court ruling is overturned, the bankruptcy will continue as planned. But if it is upheld, or even if the temporary stay isn’t granted, things could get very complicated. “Bankruptcy is not like any other case,” he says. “Once you file, you can’t just withdraw.”
If Orr is ordered to withdraw the filing and doesn’t, he could be held in contempt of state court, Tatelbaum says. If Orr obeys the judge’s orders, withdrawing isn’t so simple. Typically, to withdraw a bankruptcy case, every creditor must be given notice and a chance to object, and the federal judge will have to decide whether to accept the state’s actions.
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25 Facts About The Fall Of Detroit That Will Leave You Shaking Your Head
It is so sad to watch one of America's greatest cities die a horrible death. Once upon a time, the city of Detroit was a teeming metropolis of 1.8 million people and it had the highest per capita income in the United States. Now it is a rotting, decaying hellhole of about 700,000 people that the rest of the world makes jokes about. On Thursday, we learned that the decision had been made for the city of Detroit to formally file for Chapter 9 bankruptcy. It was going to be the largest municipal bankruptcy in the history of the United States by far, but on Friday it was stopped at least temporarily by an Ingham County judge. She ruled that Detroit's bankruptcy filing violates the Michigan Constitution because it would result in reduced pension payments for retired workers. She also stated that Detroit's bankruptcy filing was "also not honoring the (United States) president, who took (Detroit’s auto companies) out of bankruptcy", and she ordered that a copy of her judgment be sent to Barack Obama. How "honoring the president" has anything to do with the bankruptcy of Detroit is a bit of a mystery, but what that judge has done is ensured that there will be months of legal wrangling ahead over Detroit's money woes. It will be very interesting to see how all of this plays out. But one thing is for sure - the city of Detroit is flat broke. One of the greatest cities in the history of the world is just a shell of its former self. The following are 25 facts about the fall of Detroit that will leave you shaking your head...
It is easy to point fingers and mock Detroit, but the truth is that the rest of America is going down the exact same path that Detroit has gone down.
Detroit just got there first.
All over this country, there are hundreds of state and local governments that are also on the verge of financial ruin...
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Detroit’s Bankruptcy Reveals Dysfunction Common in Cities
No city was hit as hard by the recession as Detroit, America’s one-time industrial capital whose decades-long decline cut its population in half and left $18 billion in debt it can’t afford to pay.
Even so, the pressures that pushed Detroit into the largest municipal bankruptcy in U.S. history are playing out on a smaller scale around the nation. Diminished tax revenue and rising labor costs have left four cities insolvent since 2007. Service cuts were made by others such as Detroit, where street lights are dark and police are scarce.
“None of the other cities are as far along, but there are dozens, if not hundreds of cities that have similar issues,” said Alan Mallach, a senior fellow at the Brookings Institution, a public-policy research organization in Washington. “Every other industrial city has problems that could send them down the same path.”
U.S. municipalities have recovered slowly from the 18-month recession that ended four years ago, depressing property-tax revenue and leading to investment losses for pensions that many cities haven’t fully funded for years. Projected pension and health-care obligations for the 61 biggest cities will top assets by about $217 billion, according to a study by the Pew Charitable Trusts, a Philadelphia-based research and public-policy group.
Not Unique
“Detroit is a very high-profile example of some of the challenges our cities continue to face, but it’s by no means unique,” said Kil Huh, an analyst who tracks local finances for Pew. “Detroit is indicative of governments living beyond their means -- and they are going to eventually have to pay the piper.”
Detroit’s bankruptcy capped a decades-long slide for a city that once symbolized U.S. industrial might and the union-covered manufacturing jobs that propelled the growth of America’s middle-income families.
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Whoever laughed at first news may now reconsider the laughter. It is closer to all of us than we want to admit. And if it starts all over the place, the end will not be nice at all
Detroit Bankruptcy Protections Affirmed, Snyder Shielded
Detroit can enjoy the protections of bankruptcy, including immunity from lawsuits related to the case, a federal judge ruled, extending that shield to Michigan Governor Rick Snyder.
U.S. Bankruptcy Judge Steven Rhodes in Detroit today blocked lawsuits by public employee groups and pension funds who alleged the state overreached in seeking court protection from creditors. Such claims must be heard in bankruptcy court, Rhodes said. His ruling gives the city the opportunity it said it needs to address $18 billion in debt without disruptions.
“State court proceedings may well have an impact on the bankruptcy case here and administration of this case or the debtor’s assets,” he said.
Detroit filed for bankruptcy protection July 18. Kevyn Orr, the city’s emergency manager, said that six decades of economic decline had left Detroit unable to both pay creditors, including retired city workers, in full and provide residents necessary services.
Bond prices after the ruling indicated that investors are still debating the debt’s fate in bankruptcy. Detroit general-obligation bonds maturing April 2028 traded after the ruling at 81.7 cents on the dollar, the lowest this year, data compiled by Bloomberg show. Other Detroit general-obligation bonds maturing April 2015 traded as high as 93 cents on the dollar, the highest since March 18.
Chapter 9
Chapter 9 of the U.S. Bankruptcy Code, which covers municipalities, typically prevents creditors from taking actions against the debtor that might interfere with reorganization.
As public workers protested outside the courthouse, Detroit’s attorneys today argued that halting current and future lawsuits against the city, its officials and the Republican governor will provide needed breathing room to reorganize operations and debts.
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It goes on and on. Soon Detroit is going to be biggest ghost town in the USA. After this why would anybody stay there?
Should Wall Street bailout Detroit?
We know that taxpayers and pensioners will pay a price in this bankruptcy, but how about Wall Street?
The mismanagement of the Detroit pensions by investment firms has robbed them of hundreds of millions of dollars. There have been dozens of SEC and FBI investigations surrounding Detroit Pension investments in the last 10 years and this information should be considered in the bankruptcy process.
The FBI investigation finished it's 2012 case and documented over $200 million in damages. I believe this is the tip of the iceberg.
Bloomberg's Martin Braun and Chris Christof in July focused just on the real estate investment disasters of the two main pension plans and found that Detroit's general-employee pension fund and its police-and-firefighter fund saw the value of their real estate investments drop by 47% and 33%, respectively over the four years ending June 30, 2012. The losses totaled $521.5 million, about 10% of the funds' current value.
MarketWatch Encore blogger Matthew Heimer asks the obvious question :
“The bigger question—and one that haunts public-sector workers in other struggling cities – is whether and how much rank-and-file retirees should suffer for boneheaded moves like these.”
Heimer also pointed out a comment by Michigan's attorney general, Bill Schuette, referring to retirees in which he told The Wall Street Journal, "They are getting stiffed in the process... They are not the ones who may have mismanaged the funds."
I believe that the culture of corruption produced many other losses not egregious enough to get the FBI's attention, but with hundreds of millions in potential damages. I found many of these opportunity-loss examples in my latest book Kentucky Fried Pensions that looked at corruption in state plans in Illinois, New York, New Mexico, California and Kentucky.
In June 2013 Emergency Manager Kevin Orr signed an order that calls for the city's auditor general and inspector general to investigate the funds. However, this investigation is broad involving benefits, administrative issues and most likely will not have the detailed analysis of the investments that would maximize the potential for restitution.
The Securities and Exchange Commission and the Department of Justice have much information to share and I hope this can be inserted in the bankruptcy process. Many of the corrupt investment firms have collapsed but have fiduciary insurance which could be used to help the pensions. The attorney general, emergency manager, federal agencies and the unions need to stick together on this issue of holding Wall Street accountable.
I think before any contracts are broken, especially any reduction in earned pension benefits, every stone should be overturned to recover investment losses.
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As usual : the one calling for bankruptcy are the ones that caused it. A big traces cover-up going on there
The Ultimate Guide To Detroit's Chapter 9 Bankruptcy
Since Detroit’s Chapter 9 filing in late July, it has slipped off the front-pages to some extent. The Chapter 9 process is underway and Barclays provides a deep-dive look at the various liabilities involved in the bankruptcy. From the pension obligation certificates (POC), which they believe could be subject to the most volatility over the course of the bankruptcy process and will likely recover no more than 30 cents on the dollar, Barclays' muni team expands on the various aspects of the eligibility process, historical precedents (such as Stockton, CA), and the tough decisions that investors face in deciding between short-term goal of certainty of payment or a long-term goal of maximizing returns. The judge has set a mid-March 2014 deadline for the city to file its plan of adjustment.
Via Barclays,
Overview
The first court hearing on the Detroit bankruptcy was held on July 24, 2013. Two specific topics were covered: the status of conflicting state court objections to the bankruptcy filing and the extension of immunity to related parties such as the emergency manager (EM) and the governor of Michigan. In both cases, US Bankruptcy Judge Rhodes provided preliminary victories for the city, granting an injunction against any related suits being heard in state courts and extending the immunity from suits as requested.
This decision means that the city parties (the city itself, the EM and the governor) will not be distracted by the several suits filed or to be filed in State Court opposing the action. Judge Rhodes ruled that municipal unions and others seeking to litigate grievances against the proposed fiscal restructuring of the city must bring said grievances and litigation to the US bankruptcy court. This decision is consistent with general bankruptcy theory, which holds that the idea of bankruptcy is to provide a single forum to manage the many issues involved in a financial restructuring. Current and potential litigants will have at least two main opportunities to litigate their case: through the eligibility process and at plan confirmation.
Initially, there will be some administrative or procedural hearings, with the first real issue to be determined being eligibility. The EM has requested that Judge Rhodes require objections to the filing (eligibility issues) to be filed within 30 days, which he has granted. This is fairly short period from what has occurred in other Chapter 9 bankruptcies. For example, the eligibility process took over nine months in the case of Stockton, California, and was fairly long and contentious in the Vallejo, California case. In Stockton, objections were filed several months after the commencement of bankruptcy.
At an early August hearing, Judge Rhodes began to solicit comments regarding his proposed timetable, which has Detroit moving through bankruptcy court fairly quickly. Specifically, he has proposed that the trial over Detroit’s eligibility be set for late October; this is ahead of the EM’s proposal for a November deadline with regard to filing pre-trial briefs. Although Judge Rhodes is attempting to move the case along quickly, expectations of many issues of first impression are likely to result in several lengthy appeals and could prevent a speedy bankruptcy (with a September 2014 emergence date, as proposed by the EM). The judge has set a mid-March 2014 deadline for the city to file its plan of adjustment.
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Detroit Has Gone To The Dogs... Literally
Detroit may be on its way to becoming a ghost town, but the disappearance of homo sapiens from the streets just means the largest US bankrupt city is about to have a new master - man's formerly best friend, in the form of tens of thousands of stray dogs most of which happen to be a particularly vicious breed of pit bulls. Step aside Motown, and say hello to Dogtown.
Bloomberg reports that as many as 50,000 stray dogs roam the streets and vacant homes of bankrupt Detroit, replacing residents, menacing humans who remain and overwhelming the city’s ability to find them homes or peaceful deaths. Dogs which are becoming ever hungrier, and ever less domesticated. "Dens of as many as 20 canines have been found in boarded-up homes in the community of about 700,000 that once pulsed with 1.8 million people. One officer in the Police Department's skeleton animal-control unit recalled a pack splashing away in a basement that flooded when thieves ripped out water pipes. “The dogs were having a pool party,” said Lapez Moore, 30." Well at least someone is having a party.
With everyone concerned about zombies roaming the streets in the Post-New Normal, it appears everyone forgot about the dogs. And especially the "Highland Park Red" pitbull.
Poverty roils the Motor City and many dogs have been left to fend for themselves, abandoned by owners who are financially stressed or unaware of proper care. Strays have killed pets, bitten mail carriers and clogged the animal shelter, where more than 70 percent are euthanized.
“With these large open expanses with vacant homes, it’s as if you designed a situation that causes dog problems,” said Harry Ward, head of animal control.
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Pit bulls and breeds mixed with them dominate Detroit’s stray population because of widespread dog fighting, said Ward. Males are aggressive in mating, so they proliferate, he added.
One type of fighting pit bull has become known as far as Los Angeles as the “Highland Park red,” named after a city within Detroit’s borders, Ward said.
Their prevalence was clear as Ward and officers Moore and Malachi Jackson answered calls Aug. 19. On a block where vacant houses and lots outnumbered occupied ones, they found four dogs in an abandoned house -- a male and three females, including a pregnant pit bull with a prized blue-gray coat.
For now the biggest casualty of the dog infestation is the long-suffering, and longer-insolvent, USPS.
Aggressive dogs force the U.S. Postal Service to temporarily halt mail delivery in some neighborhoods, said Ed Moore, a Detroit-area spokesman. He said there were 25 reports of mail carriers bitten by dogs in Detroit from October through July. Though most are by pets at homes, strays have also attacked, Moore said.
“It’s been a persistent problem,” he said.
Mail carrier Catherine Guzik told of using pepper spray on swarms of tiny, ferocious dogs in a southwest Detroit neighborhood.
“It’s like Chihuahuaville,” Guzik said as she walked her route.
At two nearby homes, one pet dog was killed recently and another injured by two stray pit bulls that jumped fences into yards, said neighbor Debora Mattie, 49.
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Four months ago, a woman sitting on her porch on the east side was attacked by two strays that tore off her scalp, Ward said.
“We got those dogs,” he said. “It’s a big difference to that lady that those dogs were gone that day.”
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Last year, there were 903 dog bites in Detroit, according to Ward, adding that most go unreported to police. He said 90 percent are by dogs whose owners are known.
That was before the rabies spread.
Summarizing the surreal reality of Dog Town best is Kristen Huston, who leads the Detroit office of All About Animals Rescue, a non-profit that obtained the Humane Society’s $50,000 grant last year to feed, vaccinate and sterilize pets.
“Technically, it’s illegal to let a dog roam, but with the city being bankrupt, who’s going to do anything about it?”
The good news: for now the strays are dogs. How long before humans are forced to hunt other humans, some of them rabid, vicious killers, roaming the streets of whatever the latest and greatest municipal bankrupt casualty is?
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