EM Protects Banksters by Assaulting them with a Spiked Tire Iron Rather than Chainsaw

[corktownyuppie]

So now it's in writing. Can we get a little crow-eating on this conspiracy that Herr Sneider was here to protect Wall Street? If this is protecting Wall Street, I can't imagine what it would've looked like without the protection....

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On a related note, initial studies put pension funding at 82% of necessary obligations, leaving 18% unfunded. So when Orr proposes to pay 10 cents on the dollar toward pension obligations, am I incorrect to conclude that he is offering 10% of the 18% = 1.8%...which added to the 82% = 83.8% of pension funds available for retirees?

If the worst thing that happens to retirees is that they take a 16.2% haircut on their pension, that sounds like a much more advantageous position to, oh, the banksters, who will be seeing a 90% haircut.

I'm open to hearing that my math or interpretation of the proposal is incorrect, so let's hear it.

CTY

[Detroitnerd]

I'm going to reserve my judgment until I see all the fine print. This town has a long history of snatching defeat from the jaws of victory. And banksters generally get to weasel out of any oversight or bad gambles much of the time.

But if you're right, I'll be only too happy to eat crow ... hot or cold.

[313WX]

I'm going to reserve my judgment until I see all the fine print. This town has a long history of snatching defeat from the jaws of victory. And banksters generally get to weasel out of any oversight or bad gambles much of the time.

But if you're right, I'll be only too happy to eat crow ... hot or cold.

I co-sign this post 100%

And I will back MikeyinBrooklyn on writing him in for mayor.

[corktownyuppie]

I co-sign this post 100%

And I will back MikeyinBrooklyn on writing him in for mayor.

I read through the presentation. The argument basically goes like this: either you will accept the proposal [[or something close to it) or you will accept the proposal because it's all you would get in bankruptcy court or you will accept the proposal because it's all you would ever have hope to collect given the alarming financial situation and levels of service in the city

Either way, you accept the proposal.

All those million dollar contracts to all those expensive consulting firms were spent in to prepare this report, which is staggering in its depth. Banksters speak in the language of money, and if this thing goes through as Orr designs...which is still a long way away...all those dollars spent on consultants will have been worth it, because they speak the language that Wall Street understands.

And I, too, will eat crow if Wall Street somehow slips out of this.

[professorscott]

And I, too, will eat crow if Wall Street somehow slips out of this.

No crow will be eaten because no slipping out is possible. The investors in the bonds knew the risks, and now those risks will be realized.

[Toka313]

Umm, bondholders don't lose a dime. All those bonds are insured. Even if the bonds all default,, it's the insurance companies that take the hit.

I have no idea who eats what type of avian creature due to that fact.

[corktownyuppie]

Umm, bondholders don't lose a dime. All those bonds are insured. Even if the bonds all default,, it's the insurance companies that take the hit.

I have no idea who eats what type of avian creature due to that fact.

They're not all insured.

Of that, roughly $205 million of bonds issued in 2008 are uninsured. There is additional debt issued in 2010 and 2012 that is also uninsured -- the junk-rated city could not buy insurance by that point -- though those are backed by a pledge of state aid payments.

But yes...you are right, much of it is. However....

http://www.bondbuyer.com/issues/122_...1050956-1.html

For some investors, insurance gives some comfort against principal cuts, but the insurers’ own financial problems as well as the trade value of the Detroit debt raise concerns.

“We think the bond are money good; we’re not worried about principal,” said Robert Miller, senior portfolio manager at Wells Capital Management, which holds $32 billion of municipal bonds. “We’re more worried about valuation. We’re mark to market daily, so that’s what we worry about.”


“Nothing is trading off the insurance, it’s all trading off the underlying,” added Miller, whose firm holds roughly $200 million of Detroit water and sewer debt. Like most market participants, Miller said he considers the water and sewer revenue bonds among the city’s most-secure debt.

Insured debt is currently trading at close to the same rate as uninsured debt, as major questions about the viability of bond insurance companies has been really brought into question since the mortgage investment fiasco from 2008. Back then, municipal bond insurers were using their fiscal strength to insure municipal bonds.

Obviously, that didn't work out well. And some insurance companies that were AAA rated are now BBB+ rated. Yes, you are right that bondholders won't lose a dime if you are accounting from a 2040 perspective. But in the here and now, this could trigger cuts in bond prices that drop some muni positions by 25-50% or more temporarily.

If bondholders are all made whole by insurance companies and they are priced as if they were AAA-rated, I will be eating technical crow. Probably in pie form.

[Toka313]

Hey, thanks for that info. I love to learn a thing or two.

[Hermod]

From what I read in the paper, Orr will stop payment on the "unsecured debt" which is the general obligation bonds. The "secured debt" like the DWSD revenue bonds and the casino revenue bonds ar safe [[so far).

[corktownyuppie]

From what I read in the paper, Orr will stop payment on the "unsecured debt" which is the general obligation bonds. The "secured debt" like the DWSD revenue bonds and the casino revenue bonds ar safe [[so far).

This is correct. But at the same time, it also makes sense....DWSD operates as its own entity and is walled off from the city. The money used to pay for the bonds is secured by revenue from the operation. Even in a bankruptcy situation, the court will force those bonds to be paid as long as revenue exists. The other problem with the DWSD is that even if it operates as a profit, none of that money is allowed to go into the City General Fund. It all goes right back into the DWSD by law.

I do have one philosophical problem with the disparity between bond holders of the DWSD [[of which my clients are) as well as the pensionholders of DWSD [[of which my father is.)

DWSD bondholders were structured to collateralize the bonds with revenue. That's the only way they would have invested the money. My father on the other hand, even though he worked at DWSD for 30 years does not have his pension through the DWSD. He has it through the City of Detroit's pension fund.

Because the pension fund is not legally backed or insured by the DWSD revenues, his pension is at risk. It does beg the question, why for all these years, did DWSD shelter its revenues and expenses separately and away from the City. But it put its employee liabilities, including pension and health care on the City?

I don't have the answer to that. But it's unchangeable. That decision was made decades and decades and decades ago. Possibly before my father was even an employee there.

[skyl4rk]

How do you spike a tire iron? Drill it then spike it?

Inquiring minds need to know.

[canuck]

How do you spike a tire iron? Drill it then spike it?

Inquiring minds need to know.

I think a welding job is in order. Chances are you wont be able to use it as a tire iron if you love your tires.

[Honky Tonk]

How do you spike a tire iron? Inquiring minds need to know.

Just add vodka, silly. Though some people prefer tequila. Gin, though, is a social foopah.

[corktownyuppie]

Just add vodka, silly. Though some people prefer tequila. Gin, though, is a social foopah.

You're both close. Weld it with whiskey.

[Hermod]

I do have one philosophical problem with the disparity between bond holders of the DWSD [[of which my clients are) as well as the pensionholders of DWSD [[of which my father is.)

DWSD bondholders were structured to collateralize the bonds with revenue. That's the only way they would have invested the money. My father on the other hand, even though he worked at DWSD for 30 years does not have his pension through the DWSD. He has it through the City of Detroit's pension fund.

Because the pension fund is not legally backed or insured by the DWSD revenues, his pension is at risk. It does beg the question, why for all these years, did DWSD shelter its revenues and expenses separately and away from the City. But it put its employee liabilities, including pension and health care on the City?

Probably part and parcel with the city wanting control of the "jobs patronage" of DWSD. If DWSD had been a totally independent regional authority, the "friends and family" hiring practices would have been at risk, so the employees remained a part of Detroit civil service.