Not one mention of Mayor Kwame Kilpatrick or his co-conspirators UBS Bank and Bank of America in the wholesale looting of the city of Detroit? Congratulation to V.V.B for carefully eliding from the essay the important political actors except for the political/legal and judicial technocrats whose main function was to engage in unstinting self-praise about ‘compromise’. Unsurprisingly, V.V. B. hews to the current political orthodoxy.
When have we not seen the false dawn of Neo-Liberalism praised to the skies in these pages? The Free Market was another name for theft and a culture steeped in self-serving mendacity. At all costs save the floundering Neo-Liberal paradigm from any taint- a fools errand and what a demonstrable failure!
For an alternative viewpoint see The World Socialist Web Site, sure to raise the hackles of all those true believers at the Economist, readers and writers:
Some telling quotes from this are instructive:
‘US Bankruptcy Judge Steven Rhodes approved a settlement Thursday handing $85 million to the banks that swindled the city of Detroit out of hundreds of millions of dollars in an interest rate swap deal. UBS Bank and Bank of America will receive a flat sum to unwind the agreements entered into by the city in 2005-06.
The agreement was the third attempt by the banks to extract millions of dollars from the city from financial arrangements negotiated by the administration of former Detroit Mayor Kwame Kilpatrick. Judge Rhodes rejected two earlier proposals involving higher payouts, evidently concerned that they were too nakedly one-sided.
The judge called the deal an example of “the very spirit of negotiation and compromise.” In reality the agreement represents the continued looting of Detroit by financial institutions that enticed the city into complex and highly risky deals in violation of state statutes. Both Judge Rhodes and Detroit Emergency Manager Kevyn Orr have acknowledged that the two banks likely broke the law when they negotiated the swaps, which were a bet that interest rates would rise, when in fact they fell to nearly zero following the financial crisis of 2008.’
‘In 2009 the city of Detroit pledged its casino tax revenue as collateral for the swaps. Judge Rhodes said this likely violated provisions of the Michigan Gaming Act, which stipulates that casino revenue must be used for “socially beneficial” purposes.
The swaps also violated Michigan’s Revised Municipal Finance Act of 2001, which was enacted to protect cities from predatory deals. An attorney representing insurer Ambac Assurance testified during the bankruptcy hearings that “This deal should have the swap counterparties (i.e. the banks) paying the city, not the city paying the swap counterparties.”
Despite this, Judge Rhodes called the deal “entirely reasonable,” claiming a lawsuit against the banks would be too long and costly. With the agreement UBS and Bank of America have agreed to vote in favor of the restructuring plan advanced by Orr. Rhodes said the deal sets the stage for a potential “cram down,” in which a restructuring plan can be imposed on creditors.
The agreement to pay the banks follows the announcement of a deal Tuesday to pay major creditors 74 cents on the dollar for debts owed by the city. This represents a huge increase over earlier proposals, some of which were as low as 15 cents on the dollar. Among the creditors affected are wealthy bond insurers such as Assured Guaranty Ltd, Ambac Assurance Corp and National Public Finance Guaranty Corp (NPFG). In the wake of the deal bondholders, including major banks that hold Detroit debt are being told they will continue to receive “timely payment of principle in interest” in full.’
‘The proposal is contingent on the full payment by all parties signing on to the so-called Grand Bargain involving the state of Michigan, wealthy private foundations and the Detroit Institute of Arts (DIA). To this date the Michigan legislature has not voted approval of the money pledged by the administration of Republican Governor Rick Snyder as part of the agreement.
Orr is also proposing that city pension funds be managed by a five-person board, with two additional non-voting members. The plan requires that union representatives be excluded from the board.
The threat to exclude the unions from the management of the pension boards is meant to put pressure on the leaders of the American Federation of State, County and Municipal Employees (AFSCME) and other unions to drop their opposition to Orr’s proposed plan of adjustment. For their part the unions are more than willing to sign off on pension cuts as long as their control of the multi-billion dollar retiree investment funds remains intact.
At the same timeg the unions are supporting a reactionary scheme promoted by wealthy creditors to force the city to sell off artwork from the Detroit Institute of Arts. The creditors say they have lined up a group of investors who have made bids on portions of the museum’s priceless collection.
The payoff to Bank of America and UBS highlights the thoroughly undemocratic character of the bankruptcy proceedings. The banks can violate the law with impunity while pensions are slashed in violation of the state constitution and the art at the DIA is held to ransom.’
True to Neo-Liberal form, save the co-conspirators Bank of America and UBS , but for the pensioners let them experience the insecurity celebrated by Alan Greenspan.