Some of the best analysis I've seen to date regarding the EM negotiations

[corktownyuppie]

Surprise, surprise. Financial firm #2 comes out and says they reject Orr's offer. But -- like Blackrock -- they're taking the argument that it's in everyone's best interest for the State to pick up the tab and guarantee the loan.

http://www.freep.com/article/2013070...mbac-Assurance

Gonna be interesting. Looks like it's going to shape up to see a battle between who blinks first, the state or the insurance companies.

[mwilbert]

Surprise, surprise. Financial firm #2 comes out and says they reject Orr's offer. But -- like Blackrock -- they're taking the argument that it's in everyone's best interest for the State to pick up the tab and guarantee the loan.

http://www.freep.com/article/2013070...mbac-Assurance

Gonna be interesting. Looks like it's going to shape up to see a battle between who blinks first, the state or the insurance companies.

Maybe the insurance companies/bondholders will give in, but I will predict right now that Michigan is not going to make payments on Detroit debt. I would love to see someone try to get that through the Legislature. Is there some other way in which Michigan can blink?

I still think the odds favor bankruptcy court.

[corktownyuppie]

Maybe the insurance companies/bondholders will give in, but I will predict right now that Michigan is not going to make payments on Detroit debt. I would love to see someone try to get that through the Legislature. Is there some other way in which Michigan can blink?

I still think the odds favor bankruptcy court.

Yep, and I think that in a bankruptcy court, the insurance companies lose. I still stand by the position that this is a lot of bluster and posturing right now. Get out the popcorn. I think the insurance companies are incredibly ignorant about the politics within the state. First you'd have to convince suburbs and other cities that the price of higher borrowing would be far worse than the price of a bailout. Second, even if you do that, I think a lot of voters would rather pay a higher market-based penalty and stay out of it rather than go before the voters and say "I wrote a big check to save Detroit."

[Wesley Mouch]

Yep, and I think that in a bankruptcy court, the insurance companies lose. I still stand by the position that this is a lot of bluster and posturing right now. Get out the popcorn. I think the insurance companies are incredibly ignorant about the politics within the state. First you'd have to convince suburbs and other cities that the price of higher borrowing would be far worse than the price of a bailout. Second, even if you do that, I think a lot of voters would rather pay a higher market-based penalty and stay out of it rather than go before the voters and say "I wrote a big check to save Detroit."

Great point. Municipal bankruptcy and EM-land are new areas of Tomorrowland. These insurance/bankers have no idea what to do but bluster. They also don't realize that post 2008 nobody believes anything Wall Street says. Rates will go up! Yeah, right. Pass the popcorn!

[coracle]

Yep, and I think that in a bankruptcy court, the insurance companies lose. I still stand by the position that this is a lot of bluster and posturing right now. Get out the popcorn. I think the insurance companies are incredibly ignorant about the politics within the state. First you'd have to convince suburbs and other cities that the price of higher borrowing would be far worse than the price of a bailout. Second, even if you do that, I think a lot of voters would rather pay a higher market-based penalty and stay out of it rather than go before the voters and say "I wrote a big check to save Detroit."

Suburbs and other cities have control of their borrowing [[at higher rates) but writing a big check to Detroit would be losing control of our money, and there would be no end to it because the City does not attract enough tax payers to finance the standards at which it would like to live.

[corktownyuppie]

Suburbs and other cities have control of their borrowing [[at higher rates) but writing a big check to Detroit would be losing control of our money, and there would be no end to it because the City does not attract enough tax payers to finance the standards at which it would like to live.

I'm not advocating in favor of a state-wide bailout at all. But if it were to happen, there's no way in hell that I think they should write the check directly into the general fund.

It would be an understatement to say that funds should have strings attached. Instead, I think that they would need to essentially have total operational control over any funds that they are backing. In other words, the city would still exist, but the money would be controlled by Lansing.

Let's not get ahead of ourselves, I don't think it's gonna happen.

[mwilbert]

Suburbs and other cities have control of their borrowing [[at higher rates) but writing a big check to Detroit would be losing control of our money, and there would be no end to it because the City does not attract enough tax payers to finance the standards at which it would like to live.

The financial companies don't want the check to be written to Detroit; they want it to be written to the bondholders. Still isn't going to happen.

[coracle]

It's reassuring to hear from #30 and #31 that it most likely won't happen. As far as the bondholders are concerned, I think they went into their Investment with eyes open and should take their lumps. That's what I would expect if it was my money at risk. As for Detroit, if spending State money under control of the State would transform the city into a place I would want to live in [[and I want to live in a big City) then I'm all for it and would be pleased to contribute. I live in the suburbs because I'm scared to move my family into the City. Currently the "gains" aren't worth the risks.