Banks want bailout from retirees

By: Dave Palmer

Detroit’s bankruptcy case is is full swing, and the stakes couldn’t be higher for Detroit. Ultimately, it will be up to one man, Judge Stephen Rhodes, to decide whether to accept Kevyn Orr’s “Grand Bargain” which would require creditors to accept between 0 and 10 cents on the dollar, cut pensions by 4.5% along with some cost of living adjustments, all while providing $1.2 billion for the improvement of public services, or to reject it an require the city to pay the 75 cents on the dollar Syncora is requesting by turning over the Windsor-Detroit tunnel, Detroit’s City Airport, and the Detroit Institute of Arts, no doubt accompanied by more severe cuts to pensions.

It is at this point that I begin to wonder if bankers actually believe that they can get blood from a stone. It would appear they intend to do so by privatizing publicly owned assets, and even assets that are not wholly owned and financed by the city of Detroit, even seemingly expecting people outside the city should help bail them out of their greed, not to mention depriving seniors of their duly earned retirement benefits.

Detroit’s public service retirees agreed to forfeit certain additional compensation in order to provide themselves an income they could live on in their golden years. These are not golden parachutes, mind you. The value of the pensions in question will hold steady at somewhere between $20,000 and $30,000 per year before the 4.5% cut goes into effect. Yet, these people are being required to give up part of what amounts to their retirement savings plan in order to correct the errors in the management of the pension fund. Errors that they did not make, errors they did not ask for, errors in calculation that are wholly the responsibility of the pension fund managers. Somehow, the blame got shifted to the workers.

Damn them for wanting a comfortable retirement, damn them for requesting the full value of their retirement savings, how dare they be so greedy as to not want to have to work for their money, and instead have their money work for them! (Never mind that man in the three-piece suit smoking a cigar behind the curtain doing the exact same thing, except for the fact that when he loses money, he wants everybody else to help him pay for his mistakes)

Of course, the man behind the curtain will not be happy unless the public parts with services and establishments they paid for with their tax dollars are turned over to him. Never mind that old conservative belief that public money should never be used to bail out private interests. Those beliefs obviously do not apply to the billions of dollars the man behind the curtain gambled away and summarily lost.

So, we are expected to part ways with another international border crossing to allow yet another private interest control our only other local connection to Windsor. We are expected to allow Syncora to march in and take over toll collections and tunnel maintenance, all while maintaining a tidy profit margin for their shareholders. (Of course, tolls will no doubt skyrocket as the company claims that the cost of maintaining the tunnel was greater than what they expected and it’s up to us poor waifs to pay for their miscalculation.)

Not only that, but the tri-county area is apparently on the hook for the terrible management of Detroit’s finances as well, considering that Syncora is also demanding we turn over the DIA. Never mind that ballot item we passed a few years ago agreeing to help fund the DIA with some of our tax dollars in exchange for free admission to the museum at any time. Never mind that the art in the museum is technically held in a public trust, and can only be sold or traded for the enhancement or improvement of the collection. The entire tri-county area should summarily turn over their tax dollars to Syncora and allow them to start charging an admission to the museum of top of that so their balance sheets can consistently show numbers in the black.

And of course, the corporate welfare scheme would not be complete without a private airport for Syncora executives and all their uber-wealthy buddies to land their private jets and helicopters. Never mind that the surrounding area will no doubt be bought for a song, gated communities and Hilton hotels built, and property values jacked so high that no one but the .01% will be able to afford to visit, much less live there.

It is at this point that I’ve had quite enough of this nonsense.

It is not the fault of the retirees that the pension fund managers mismanaged their retirement plan. Therefore, we should hold the pension fund managers responsible. We helped fund the DIA, helped fund the tunnel, and helped fund the airport, so all those public assets should be off-limits to private interests. Most of all, we should be holding the banks and bond purchasers responsible for their poor investments.

I can’t get a fourth credit card to pay of the other three I’ve already maxed out. How is it then that Detroit was able to qualify for loan after loan and loans to pay off loans? All the bankers and insurers could see is the piles of money they would be raking in from interest, penalties, and insurance premiums. Never mind that investment technically has two possible outcomes of success or failure. In the mind of bankers, even failure needs to be a success, regardless of the cost to the economy, the general public, or even the nation.

Therefore, we can solve this problem by requiring investors to eat crow and write off their bad investments. If we allow banks to make bad business deals, bad investments, and bad credit decisions and require the public to replace the money they have lost in those deals, what consequences for their actions are they experiencing? The more we continue to require the public to bail out private interests, the more bold they will become in their gambling, the more they will fail, and the more they will come back to the public with their hands out like a child who has spent all of his allowance money on a toy they broke in the first five minutes they played with it. Judge Stephen Rhodes has an opportunity to make big banks and bond insurers have some culpability for their mistakes. It would be most wise for him to use this power to its greatest effect.

Detroit: Bankrupt, DIA and workers: screwed

By Dave Palmer

Today marks a new low in America’s history. Today is that day that Judge Steven W. Rhodes decided that Detroit is officially eligible for Chapter 9 bankruptcy, according to the New York Times. (http://www.nytimes.com/2013/12/04/us/detroit-bankruptcy-ruling.html?pagewanted=1&_r=1&nl=todaysheadlines&emc=edit_th_20131204) The Times also states that Rhodes decided that the pensions of thousands of retired, soon-to-be-retired, and current workers are not protected under Chapter 9 Bankruptcy. WDIV news reported that not only are pensions on the line, but the works of the DIA, and many other city-owned assets are on the table as bargaining chips.

Most Detroiters at this point most likely expected that Detroit would enter Chapter 9 bankruptcy, especially considering the city is some $18 billion in the hole. However, I would argue that most Detroiters did not expect that a judge like Rhodes who has a reputation for being tough but fair would rule against the retirement plans of thousands of former City of Detroit employees along with the city jewels.

Detroit’s bankruptcy is the largest in history, and will most likely serve as precedent in future municipal bankruptcy cases. Considering that, according to Huffington Post http://www.huffingtonpost.com/2013/07/24/steven-rhodes-judge-detroit-bankruptcy_n_3643284.html, Rhodes worked to attract corporate bankruptcies earlier in his career, his final decision in this case potentially could reverberate throughout both the public and private sectors.

That’s good news for corporations and pension fund managers, but bad news for the workers.

Already, the private sector has all but eliminated employee eligibility for pensions, leaving the public sector with the lion’s share of potential pensioners. If you don’t believe me, just think back about a year when a company by the name of Hostess told its employees that their pension fund was overextended and it would have to be cut. This led to an employee strike, and Hostess in the end declared bankruptcy, only to have their products magically reappear on store shelves just recently. The executives ended up with a golden parachute, and the workers got stuck with the check.

Depending on the outcome of Detroit’s bankruptcy hearing, employees in the public sector could end up in the same boat as the Hostess employees; stuck with a meager or no pension after they spent years of their life and thousands of their own dollars to buy a bit of security in their golden years. All a municipality would have to do is enter into a pension agreement they knew was destined to fail, fail to pay their bills for about 30 years, declare bankruptcy, and POOF! No pensions for workers. As mentioned in the latter paragraph, the fact that Rhodes actively tried to land corporate bankruptcy cases and ruled on some of them could be used by greasy corporate attorneys as a way for companies to welsh on their contractual pension obligations through bankruptcy.

It has become quite clear at this point that our government and our corporations have pretty much become a single entity. Our politicians now have to raise many millions of dollars which they have to beg for from corporations. The corporations then expect certain policies to be enacted in return, which of course benefit only the corporations and hurt everyone else. In some cases, members of Congress have multi-million dollar lobbyist jobs waiting for them when they leave Congress in return for enacting regressive tax schemes and confirming the appointment of judges who have their best interests in mind. These are the same companies that they are supposed to be regulating and watching over to prevent them from declaring bankruptcy so they can line their own pockets with a middle-class worker’s pension.

Now is the time for Americans nationwide to petition their legislatures for a Constitutional amendment severely limiting private funding of public elections and preventing members of Congress from being involved in any way, shape, or form with the companies they are supposed to be regulating. The Constitution states that if a constitutional convention is called by two-thirds of the legislatures of the States, and if that Convention proposes one or more amendments. These amendments are then sent to the states to be approved by three-fourths of the legislatures or conventions, without the involvement of Congress.

We the people must take our government and our democracy back. If Congress isn’t with us, they are against us, and we must take action that circumvents their stranglehold on this country.

Detroit to Retirees: We’re cutting your healthcare, here’s $125

By Dave Palmer

The saga of Detroit’s bankruptcy and the apparent desire of bankruptcy attorney come Detroit emergency financial manager Kevin Orr to deprive retirees of security in their golden years continues, according to the September 12th edition of the Detroit Free Press.

The latest nonsensical plan is to replace health care benefits for retirees under 65 with a monthly stipend of $125. Those who are over 65 will be rolled onto Medicare, thus passing the cost of retiree health care from the City of Detroit on to the federal government. This seems to be an extension of Orr’s August insurance proposal that would increase the annual deductible for singles with no dependents from $200 to $750 annually, with total out-of-pocket expenses capped at $1,500. A family would see their deductible increase to $1,500 annually, with a cap on out-of-pocket expenses capped at $4,500, up from $3,000.

Never mind that the retirees agreed to deduct money from both their regular paychecks and their pension checks to pay for this health care. Never mind the fact that the retirees are in no way responsible for the bumbling of the finances supporting their health care plan. If Orr gets his dual paychecks as both city financial manager and as member of the bankruptcy firm that will no doubt handle Detroit’s bankruptcy, then everything is hunkey dorey in his world.

What sort of health plan will $125 buy? Before I added on to my spouse’s insurance plan, I paid $50 a month for health insurance that basically only covered 50% of the costs of emergency room procedures. No office calls or prescriptions were covered, and as far as dental and vision went, not even emergency procedures were covered. Pretty soon, that rate went up to $60 per month, then $80, then $100. I was 26 at the time I purchased this insurance.

Now, I’m not necessarily an expert in insurance costs, but based on what I do know about insurance, it seems rather unlikely that someone of retirement age will be able to get any sort of health insurance plan at the rate of $125 per month. Therefore, they will have to dip into their already limited funds in order to be able to afford health insurance. Of course, the state and the insurance companies are remaining mute on how much insurance plans offered on the health insurance exchange will cost starting October 1.

Another problem that retirees under 65 face is the fact that the Michigan legislature has decided not to vote for immediate implementation of Medicaid expansion, thus delaying it until April of next year. If Orr’s plan comes to fruition before then, then thousands of seniors whose pension adds up to more than 100% but less than 400% of the poverty level could be thrown into insurance limbo. Compounding this problem is the fact that the enrollment period ends about a month before Medicaid expansion is scheduled to take effect, leaving them in limbo until next October.

Detroit’s bankruptcy is the largest municipal bankruptcy in the history of the country, and any decision handed down will no doubt serve as precedent for future municipal bankruptcies. That is why Orr’s plan cannot be allowed to proceed.

If Detroit is allowed to cut pensions and sever healthcare benefits based on a bankruptcy proceeding, then it will not be long until other municipalities and possibly even private companies will take to declaring bankruptcy in order to avoid making good on their contractual pension and healthcare promises.

From there, it will be a few short steps to invalidating other contractual obligations through claims of bankruptcy, such as union work agreements, non-union work agreements, and virtually anything else that can be sealed through a written contract.

It it through proccesses like these that the top 1% have accumulated 95% of financial gains in the recovery since the Great Recession. This trend will continue unless we all call our Representatives and Senators in the Michigan Legislature and tell them to protect the workers and the retirees. Tell them that you as a constituent will not stand for allowing big banks to subsidize their stock market gambling schemes with taxpayer dollars, pension funds, or healthcare dollars. Don’t allow Detroit’s bankruptcy to be a model for bailing out banksters who make bad business decisions.

Orr’s plan to fix Detroit: Sell the jewels and squeeze the pensioners

By Dave Palmer

Much talk is swirling through the news and the rumor mills as to what is going to happen to Detroit, its prized treasures, its workers, and its pensions as it is staring down the barrel of a potential Chapter 9 bankruptcy. Kevin Orr, Detroit’s emergency financial manager, seeks to stave off that possibility with some bold propositions to be sure. According to various articles in the Detroit Free Press, many priceless works of art could have a price on the auction block, some of the irreplaceable cars in the Detroit Historical Museum may be replaced with photographs under the auctioneer’s gavel, and the old idea to lease Belle Isle to the city surfaced as just a few ideas to pay off Detroit’s estimated $17 billion in debt.

As shocking as those ideas may be to many Detroiters, many more could be in for an even greater shock according to the June 9th edition of the Free Press. According to an article regarding the possibility of municipal bankruptcy for Detroit, the pension fund and associated health care costs make up about $7.5 billion of the $17 billion in unfunded debt. Surprise, surprise, retirees well out of the work force, people preparing to retire, and current workers may have to rethink their retirement situation as their pensions may be up for reduction or possible elimination. In fact, a news story aired on June 11th’s edition of 101 WRIF’s Dave and Chuck the Freak Show featured sound bites from an interview with Orr in which he referred to pensioners as “creditors” and indicated that they may have to take a hit along with all the rest of the creditors.

Pensioners are creditors? Does that mean that the city borrowed against the pension fund and now owes the workers that money? Shock.

Maybe it means that they took the workers’ contributions and tried to pay down other debt with that money. Again, shock.

No matter how the pension fund debt reached the $7.5 billion level, the fact still remains that the workers and the pensioners are not at fault. They signed a contract with the city in which they agreed to contribute part of their paycheck to the pension fund and the retirement health care plan. These plans were (hopefully) reviewed by actuaries to verify their long term sustainability, then signed, sealed and dated by city attorneys based on that assessment.

Instead of penalizing the workers for signing a contract backed by fingers-crossed-behind-the-back promises of city leaders and city attorneys, perhaps we should penalize the actuaries that signed off on the long-term sustainability of the contract. We could also penalize every past member of the Detroit City Council for making such pie crust promises. While we’re at it, we should hit the smiling mayors along the way who certified that the councils had every intention to fulfill these contracts, so long as they could take money out of the piggy bank and leave IOU’s in their place. Let’s not forget all the lawyers who approved these contracts. After all, it’s become quite apparent they didn’t do their due diligence when investigating the actuaries’ long-term sustainability claims.

Some other places to consider cutting is the size of the Detroit City Council, as well as their salaries. Let’s face it, Detroit’s population has declined to a point where a nine-member city council is no longer necessary. Five might be a better number. And why doesn’t the city consider requiring them to drive their own cars to work instead of paying for a city vehicle? How about eliminating the city-financed cell phones for the council? Surely the council’s reduced salary will be enough to cover their cell phone bill.

Maybe the city could try actually collecting taxes from its residents. After all, the Detroit News reported in February that 47 percent of the city’s taxable parcels are delinquent on their 2011 bills, adding up to some $246.5 million in taxes and fees. The Detroit Free Press reported in May of 2011 that 90% of  residents who live in the city and work outside the city pay no city taxes, adding up to the total budget deficit in that year, $155 million. Sure, they scream that paying taxes is useless because the city is delinquent in its services, but did they ever consider that the city may be delinquent in their services because they don’t pay taxes?

Detroit has definitely gotten itself into a pickle that won’t be easy to get out of thanks to systemic corruption, council members and mayors playing politics, and a kick-the-can-down-the-road mentality. But, this is not the fault of the city workers who were loyal to a fault, served their required time, and now are collecting low five-figure pensions. It is directly the fault of corrupt city officials, actuaries with bad math skills, and lawyers failing to fulfill their fiduciary duties, and they, not the workers, should be made to pay the penalty with their pensions and forced to refund money collected for hours billed.