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Derivative Losses, Bad Bets, And Aggressive Assumptions Leave Detroit's Pensions Massively Underfunded

Tyler Durden's picture


Late last week, Detroit's emergency manager Kevyn Orr, outlined his plan to stop a disaster becoming a catastrophe in the slumping city. The initial suspension of payment on pension obligation bonds is just the start as Orr warns unsecured creditors may only receive up to 10 cents on the dollar as about $2.5 billion in general unsecured debt won't be recovered. Rather incredibly, the city's General and Police and Fire retirement systems have a combined underfunding of $3.5 billion made worse by "aggressive actuarial assumptions," and "investing in risky development projects around the city and loans that will never be repaid." Under more realistic assumptions the funding status of the two pensions drops from 83% and 100% to 65% and 78% and he notes that "if these pension funds' assets had just been invested in a conservative way," as opposed to the political and reach-for-yield driven extravagance, "they probably would be fully funded now." The bottom line is not just creditor haircuts but,"significant cuts in accrued, vested pension amounts for both active and currently retired persons."

Via Pensions and Investments Online,



Unsecured creditors may only receive up to 10 cents on the dollar under Mr. Orr's plan; his team said about $2.5 billion in general unsecured debt won't be recovered.


Detroit's liabilities total $17 billion, including $1.4 billion related to COPs and an additional $344 million in marked-to-market swaps related to the COPs, according to Mr. Orr's creditor plan.




Mr. Orr's pension fund analysis found that previous “aggressive actuarial assumptions” resulted in “substantially understated” funded status for each city pension plan. The funded status of the General Retirement System was 83%, while that of the police and fire fund was 100%, according to June 30, 2011, independent valuations.


Recalculations based on “more reasonable assumptions” substantially lowered the funded status of the General Retirement System to 65%, and the police and fire system to 78%, according to Mr. Orr's creditor plan.




“Because the amounts realized on the underfunding claims (the COPs and swaps unsecured debt) will be substantially less than the underfunding amount, there must be significant cuts in accrued, vested pension amounts for both active and currently retired persons,” the creditor proposal said.




“As discussed in the creditors' meeting today, if these pension funds' assets had just been invested in a conservative way, instead of investing in risky development projects around the city and loans that will never be repaid, they probably would be fully funded now,”


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Tue, 06/18/2013 - 09:57 | 3667726 fiftybagger
Tue, 06/18/2013 - 10:00 | 3667744 MillionDollarBonus_
MillionDollarBonus_'s picture

This pension disaster is a typical example of how CORPRO-CAPITALISM destroys a country. How many more disasters do we have to endure before people wake up and opt for a fairer and more equal society where the poor and sick are taken care of and the billionares pay their fair share?

Tue, 06/18/2013 - 10:01 | 3667750 Dr. No
Dr. No's picture


Tue, 06/18/2013 - 10:22 | 3667801 Manthong
Manthong's picture

Government employee pensions might be reduced but will be saved.. influential union pensions, too.

Anybody else.. SOL.

It is the way the system will attempt to preserve itself (at the expense of freedom and justice).


Some people got some book-learning to do..

It's Corpro-Statism that is the problem and it allows the concept of capitalism to be bastardized.

By MDB’s definition, the Nazis were capitalists..

Tue, 06/18/2013 - 10:22 | 3667858 Joe Davola
Joe Davola's picture

I entered "investments" into google translate Politica -> English and it returned "fuck the taxpayer while lining my supporters pockets"

Tue, 06/18/2013 - 10:50 | 3668033 flacon
flacon's picture

BrotherJohnF has a good exposition about the Detroit Pension Ponzi. Turns out the ponzi goes deeper and affects other pension ponzi's too. This should come as no surprise. 


Pension Ponzi

Tue, 06/18/2013 - 12:40 | 3668388 Never One Roach
Never One Roach's picture

<<loans that will never be repaid>>


So, who got those 'loans?'


BTW, excellent video by Brother John above, esp his "Cascading Defaults" illustrations. Scary.

Tue, 06/18/2013 - 14:47 | 3669055 youngman
youngman's picture

The loans were given by the city to someone who said they were going to bebuild a building or start a business...but ended up just stealing the happens in all big cities....Denver has a minority area...5 points..where mayors give loans to minority develpoers that never get repaid...there is a hotel there that has been remodeled/restored 5 times since I have lived there...always suposed to be a big jobs tourist attraction.....alls it is is a payoff for getting out the vote...millions jobs....its a joke...but its political...liberal politics at its worst...

Tue, 06/18/2013 - 13:36 | 3668791 smlbizman
smlbizman's picture

i do love the flavor they try to pass off we're all in this together....and i go on record as i will no longer hold the sheep dog depends on me to do him right, so no peanut butter...just because the sheep like peanut butter they still trusted their masters,

Tue, 06/18/2013 - 12:16 | 3668445 Midasking
Midasking's picture

exactly why there will be no taper.... democratic mob will rule! Everyone will get their check.. it just won't buy much..

Tue, 06/18/2013 - 10:04 | 3667761 EscapeKey
EscapeKey's picture

Socialists love the word "fair", because it's completely meaningless.

But obviously, in their interpretation it means that "someone else" has to pay my expenses. Because that's fair to me.

Tue, 06/18/2013 - 10:34 | 3667947 Popo
Popo's picture

And what makes the argument for socialism particularly outrageous in this case is that Big Labor is exactly what destroyed Detroit.



Tue, 06/18/2013 - 10:44 | 3667996 EscapeKey
EscapeKey's picture

In 1913, Argentina were the 3rd richest nation on earth.

Then, they elected a socialist.

Tue, 06/18/2013 - 11:15 | 3668164 Umh
Tue, 06/18/2013 - 11:20 | 3668183 PT
PT's picture


No, cheap foreign labour destroyed Detroit.  Or over-priced real-estate destroyed Detroit.  I too could work for 2 dollars per week if my mortgage was only 5 cents per week.  But if I only earn 2 dollars per week then don't expect me to buy a car for 25 grand...  WTF doesn't anyone think these things through? 

Tue, 06/18/2013 - 14:24 | 3668971 Things that go bump
Things that go bump's picture

It took a long time for Henry Ford to actually grasp this concept and he was dragged to it kicking and screaming before he finally raised the salaries of his employees enough so that they could afford to purchase his product. He had a miserly nature, as many of those successful early industrialists did, but his self interest finally won out. It must have been an epic battle. A whole new generation of industrialists who have forgotten the lessons of the past will need to learn this for themselves. It is so tedius that as a species we repeat the same mistakes over and over again.

Tue, 06/18/2013 - 14:51 | 3669068 youngman
youngman's picture

Looks like the APPLE industrialists have this figured

Tue, 06/18/2013 - 10:56 | 3668067 scatterbrains
scatterbrains's picture

you have no voice what so ever in the war that will erupt between the banks (that were bailed out via fed's printing and onshoring of trillions of worthless paper) and the union workers who's pensions will get dick for a bailout.  Fair is fair and maybe HMS might want to consider doubling their ammo stash when that day comes.

Tue, 06/18/2013 - 10:13 | 3667798 LawsofPhysics
LawsofPhysics's picture

I agree, someone collected fees and got a bonus for selling all those financial "products".  Line those people up and execute every last one of them.  Nice work MDB, I second your call to roll the motherfucking guillotines.

Tue, 06/18/2013 - 10:44 | 3667998 imbtween
imbtween's picture

In this case it is no surprise that they've cut the police force in half - if I were among the kleptocrats who destroyed the city and stole the cops' pensions, I'd want less of them walking around heavily armed.

Tue, 06/18/2013 - 11:25 | 3668202 PT
PT's picture

imbtween:  If the population halved then it makes sense to halve the police force.  Or did I miss something?  (Perhaps the high crime rate ...)

Tue, 06/18/2013 - 12:43 | 3668582 Never One Roach
Never One Roach's picture

My Dad says there is a retired cop from Detroit who just bought a $924,000 house down the way...paid don't think I'll ever see that  kind of bread.

Tue, 06/18/2013 - 14:30 | 3669000 Things that go bump
Things that go bump's picture

I saw one on House Hunters a while back who lived in an enormous house outside Seatle with panoramic and unobstructed ocean views. He was looking for a vacation home in the Caribbean. I didn't think honest cops saw that kind of money.

Wed, 06/19/2013 - 01:58 | 3670537 MisterMousePotato
MisterMousePotato's picture

"I didn't think honest cops saw that kind of money."

Then you are delusional.

Tue, 06/18/2013 - 11:00 | 3668097 Urban Redneck
Urban Redneck's picture

And then there are the pension trustees who also got bonuses for purchasing financial "products" and marking their values to whatever would keep the monkeys happy... so they could go to their next posh "investing" conference on their investor's dime.

Are you sure you aren't taking your rage against the guy who lifted your wife's jewelry out on the pawnshop owner who served as a willing fence?  

Tue, 06/18/2013 - 11:06 | 3668128 Umh
Umh's picture

Let us not forget the stupid politicians and bureaucrats that bought the products.

Tue, 06/18/2013 - 10:31 | 3667929 Hippocratic Oaf
Hippocratic Oaf's picture

If they would have just invested conservatively.........


Tue, 06/18/2013 - 11:45 | 3668287 sluggo
sluggo's picture

I think it's "Pigs get fat, Hogs get slaughtered". But you made your point!

Tue, 06/18/2013 - 11:26 | 3668214 Gold Eyed Cat
Gold Eyed Cat's picture

Detroit. Democrats. Corruption. Unions. Epic Fiscal Failures.

But MillionDollarBonus' go-to move is to blame capitalism.  And in all caps, like a total jackwagon.  Doc No is right, MDB has become a real bore.  He should relocate to France with that crap and live the life of his wet socialist dreams.

Everyone with 3 brain cells understands 100% asset confiscation from all billionairs still can't get us out of the hole we are currently in.  It would only guarentee Atlas would shrug and any remaining business would hit the exits.

That fair share crap is a tool for Nazis and communists.  What better way to control the game... than to control what is fair.  


Tue, 06/18/2013 - 12:47 | 3668595 Freddie
Freddie's picture

MDB is troll and he posts his crap as a joke to get us to laugh.  It is a joke but that one was pretty weak.   We used to have more entertaining trolls here.  Most are a joke to get a laugh and they are not serious.  

Tue, 06/18/2013 - 11:55 | 3668311 Kirk2NCC1701
Kirk2NCC1701's picture

1. MDB, "Fair Share" of taxes is only one part of the bigger problem, which is (a) Fraudulent monetary system (privately-issued fiat + FRB), and (b) perpetuated by crooked politicians and casino capitalists.

2.  MDB, define "fair share".  I'll take a shot at it...

   2.a. Use Excel and graph this:  Use X-axis for Taxes between 0 and 100% (0.0-1.0)

   2.b. On Primary Y-Axis, use Taxable Income.  On Secondary Y-axis, use Log(Income).

   2.c. Decide Min and Max tax points of X-axis, that correspond to Income.  E.g., 5% for $5000/yr, 45% for $1M/yr

   2.d. Draw a straight line on the Log(income) scale between Min and Max points.  You now have a LOG-based taxation system.  BTW, Nature just loves the log (exponential) scale!  Learn to understand it, and to stop fighting the Laws of Nature.

   2.e. Treat Earned Income same as Investment Income.  Still OK for investors, but not so 'OK' for an FRB Ponzi system that needs to keep growing.

   2.f. If you want to get really creative, you can have a Surtax for the > $1M/yr (above the 45%) crowd, but they get a say on where the money is going.  There are, say, 4 buckets for collection of Surtax: 1. Federal, 2. State, 3. Local (City/County), 4. Charity. 

Set limit for Min and Max on each, so that all get something, but the rich taxpayer gets a direct say on who gets more (a lot) and who gets less (little).  The rich taxpayer thus gets a direct tax-vote for supporting whatever level of Gov that he likes/dislikes and show his 'benevolence' via contributions to Charities. 

The various levels of Gov and Charity are now competing for Surtax on a meritorious basis (no pork-barrel amendments!), showing a track record of Performance vs. Cost.  The rich also get public recognition for their charitable contribution, which their egos love anyway.  If not, then they are psychos or sociopaths (giving nothing back?), who do not deserve the public's sympathy or support, and can also be publicly 'acknowledged'.  People may then choose to not favor their products or services, if so inclined.  Free Markets, baby!

There, ya go.  No arbitrary/capricious component to it.  Taxes become REALLY simple, a 5th grader could do it.  On the 'down side', it would down-size the IRS and a lot of CPA jobs.  Sorry.  And if this 5th grade math is too complicated for you, learn to live with whatever decisions the "6th Graders & Beyond" make for you.

p.s. IF (and that's a big 'IF') you had a "fair" system, I remain highly skeptical that things would be "fixed" for good -- because the need of the FRB and its owners is now curtailed, and they could no longer support (select!) their preferred (chosen!) political candidate, since these candidates are now also handicapped with how much they can spend.  Even the MIC would now have to live within its means, and therefore gunboat diplomacy and the NWO (global Manifest Destiny) is now 'shot'.  Do you think that this will happen?  I think not!


Tue, 06/18/2013 - 10:00 | 3667745 DaddyO
DaddyO's picture

Just wait until the pensioners quit receiving their checks and the real end game will come into view.

More government bailout...


Tue, 06/18/2013 - 10:08 | 3667774 ejmoosa
ejmoosa's picture

Is it too late to declare Detroit a Gun Free Zone?


Tue, 06/18/2013 - 10:13 | 3667802 LawsofPhysics
LawsofPhysics's picture

LOL, indeed.  would probably have better luck declaring gravity illegal.

Tue, 06/18/2013 - 10:32 | 3667935 Groundhog Day
Groundhog Day's picture

The retired police officers and firefighters milked the system by doing all the overtime in the last 3 years of their 25 year term to get a huge bump in their pay for life lottery ticket.  I can't wait till the funds run out so i can see the working cops go after the retired cops for fucking up the system (at least partly- they'll have to go after the bankers for some of the fraud as well) Fun times straight ahead

Tue, 06/18/2013 - 11:29 | 3668227 waterhorse
waterhorse's picture

As I've always said, there is NOT ONE of these government workers that is worth a 100K+ pension.  NOT ONE.

Tue, 06/18/2013 - 15:12 | 3669125 SilverRhino
SilverRhino's picture

I have a beautiful and cruel idea. Let the city start paying out the retirees pensions with the 'market value' of foreclosed / tax liened properties in Detroit.  

Got a pension worth $250K?   Here are 5 city lots and one derelict building.   PS: Now you can start paying taxes on these places.   

Assign the lots randomly as well,  no playing favorites.

Oh, and cap the pensions at $500K or so ... after all, it's only being "fair" ... 

Tue, 06/18/2013 - 10:48 | 3668023 TJ00
TJ00's picture

Just wait until retired SWAT members quit receiving their checks and the real end game will come into view. FTFY

Tue, 06/18/2013 - 09:56 | 3667727 Dr. No
Dr. No's picture

However, the Fund managers all received their promised bonuses throughout the years.   The fundamental objective of the managed funds was satisified.

Tue, 06/18/2013 - 10:05 | 3667767 EscapeKey
EscapeKey's picture

Well, yes, but otherwise they might have lost all the "talent".

Tue, 06/18/2013 - 09:57 | 3667731 fonzannoon
fonzannoon's picture

"if these pension funds' assets had just been invested in a conservative way," as opposed to the political and reach-for-yield driven extravagance, "they probably would be fully funded now."

They should have bought 5 year treasuries paying .5%?

Fucking hysterical. ZIRP crushed the whole thing and yet a few days worth of POMO sprayed in their direction could make the whole thing go away.

Tue, 06/18/2013 - 10:06 | 3667771 EscapeKey
EscapeKey's picture

Add leverage.

Lots and lots of leverage.

After all, we all know risk has been eliminated.

Tue, 06/18/2013 - 10:42 | 3667984 Hippocratic Oaf
Hippocratic Oaf's picture



Im sure when they started, probably averaged 4 to 5% treas.

When the bonds get called they have to buy riskier product that makes $$$$ only for the banks writing the debt.

Bernank helped ZIRP Detroit faster down the toilet 

Tue, 06/18/2013 - 11:06 | 3668125 MarsInScorpio
MarsInScorpio's picture

Watch Bernanke go invisible when he finally quits. IF - and that's a very big IF - the muppets ever figure this all out, they will make Brazil look peaceful.


Of course, that will only come IF the ghetto dwellers lose thier welfare, meds, and most importanlt of all . . . CABLE TV!!


Tue, 06/18/2013 - 11:15 | 3668163 patb
patb's picture

ZIRP is crushing a lot of pension systems,  the 5 years of zero fixed income return is causing a lot of plans to go underfunded.



Tue, 06/18/2013 - 10:47 | 3668012 ExpendableOne
ExpendableOne's picture

"pomo sprayed in their direction" == "I fart in your general direction!", snort!  Histerical....


Real life zombie movies coming to your town soon.

Tue, 06/18/2013 - 09:57 | 3667733 hampsterwheel
hampsterwheel's picture

They'll all be bailed out - have no fear - no defaults are allowed - none - niente - nada

Tue, 06/18/2013 - 10:48 | 3667945 El Viejo
El Viejo's picture


I wonder how the Madoff victims made out?? Or the Corzined?? How many nickels on the dollar??

In the case of Madoff some were totally reimbursed:


Tue, 06/18/2013 - 09:58 | 3667736 peter4805
peter4805's picture

Things not looking good in Debtroit. I can't understand how a city with such a high percentage of liberals and blacks is doing so poorly.

Tue, 06/18/2013 - 10:06 | 3667768 Big Corked Boots
Big Corked Boots's picture

Clearly, their policies were inadequately implemented.

They should be given the opportunity to go "all-in."

Tue, 06/18/2013 - 10:26 | 3667884 Silverhog
Silverhog's picture

Maybe that's their version of Utopia.

Tue, 06/18/2013 - 10:01 | 3667746 Doubleguns
Doubleguns's picture

California should take copious notes. Pensioners for sure..

Tue, 06/18/2013 - 10:58 | 3668087 Kirk2NCC1701
Kirk2NCC1701's picture

DHS will take copius notes, as the thing they and the Banksters are interested in, is "when will the Frog jump"?  When will we have riots?  Then ease off on the gas pedal -- just short of riots -- for new Max Profits and Optimal Slavery.   Presto:  the New Normal. /s

Tue, 06/18/2013 - 10:01 | 3667748 toady
toady's picture

I haven't heard anything about those cali bankruptcies in a while... How is Stockton doing? If they're coming around then their plan x10 should work for Motown.

Tue, 06/18/2013 - 10:07 | 3667773 EscapeKey
EscapeKey's picture

You really think that's more important than Paris Hilton's new hair style?

Tue, 06/18/2013 - 10:18 | 3667826 toady
toady's picture

I get that all the time.

"I didn't ask for ideas, I just wanted you to agree that it's horrible!"

Tue, 06/18/2013 - 10:01 | 3667749 101 years and c...
101 years and counting's picture

you mean bubble blowing and ZIRP has consequences?  but, but, but.......

Tue, 06/18/2013 - 10:05 | 3667757 involuntarilybirthed
involuntarilybirthed's picture

,"significant cuts in accrued, vested pension amounts for both active and currently retired persons."

Look for the them to trash the place.  Well..........maybe a march on Washington in protest of themselves.

Tue, 06/18/2013 - 10:12 | 3667788 JungleJim
JungleJim's picture

Trash the place ! That's really funny, I almost pissed myself ...

Tue, 06/18/2013 - 11:09 | 3668134 MarsInScorpio
MarsInScorpio's picture

Subtle . . . and effective.


Tue, 06/18/2013 - 10:04 | 3667760 involuntarilybirthed
involuntarilybirthed's picture

Their votes will be bailed out (again) by libs in D.C. 

Tue, 06/18/2013 - 10:06 | 3667769 apberusdisvet
apberusdisvet's picture

Guillotines for the union bosses or the politicians, or both or is it Karma for promising more than could be delivered?

Meridith will be proven to be right after all, she just didn't take into account the life span of "extend and pretend" which is rapidly entering the ICUs in a town, city, jurisdiction near you. 

Tue, 06/18/2013 - 10:06 | 3667770 Ancona
Ancona's picture

I should be able to see the columns of smoke from here in Florida when the checks get slashed.

Tue, 06/18/2013 - 10:12 | 3667787 El Hosel
El Hosel's picture

What kind of crap is this? Why are the pension funds not allowed to participate in the 100% winning trade program afforded to the TBTF?

Tue, 06/18/2013 - 11:11 | 3668146 MarsInScorpio
MarsInScorpio's picture

Because the Top 5 TBTF banks own 57% of all the assets in the US - and the TOP 5 pension funds in Detroit don't . . .


Tue, 06/18/2013 - 10:09 | 3667778 ejmoosa
ejmoosa's picture

It's a damn good thing Obama saved the Auto Industry.


Imagine what Detroit would be like if he hadn't.

Tue, 06/18/2013 - 11:12 | 3668149 MarsInScorpio
MarsInScorpio's picture

Totally brilliant deadpan humor . . .


Tue, 06/18/2013 - 10:10 | 3667780 pods
pods's picture

So another ponzi is imploding?

I am Jack's complete lack of surprise.


Tue, 06/18/2013 - 10:10 | 3667781 More_sellers_th...
More_sellers_than_buyers's picture

Honestly....did these idiots not sign a paper somewhere declaring their fiduciary resposibilty? who is going to jail ...Dammit someone pay some consequences !!!!!!!!

Tue, 06/18/2013 - 11:13 | 3668153 MarsInScorpio
MarsInScorpio's picture

What does TBTJ mean to you . . . ?


Tue, 06/18/2013 - 10:10 | 3667782 Divine Wind
Divine Wind's picture




Hahahahaha. Brahahahahhaha.

But at least everyone has an Obamaphone.

Tue, 06/18/2013 - 10:13 | 3667785 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Off topic but since Bloomberg gets all the love in New York need to highlight the other Marxist Andrew Cuomo and how he is using tax breaks to centrally plan the New York economy.

"The chief executives of GE, Goldman Sachs, and JPMorgan Chase are lining up behind a plan by the governor of New York, Andrew Cuomo, for what the governor calls “Tax-Free New York.”

Ordinary New York taxpayers, watch out."


I concur just on the fact that 2 of biggest government QE welfare queens are behind it also consider that GS considers everyone Muppets to be slayed that alone should make one skeptical if they are behind something.


"The whole episode is newsworthy for at least two reasons. First, there’s the attempt by Cuomo, a possible Democratic presidential contender, to portray himself as a tax-cutter when he isn’t one. Second, there’s the way that business leaders go along with it. 

If Cuomo were actually proposing a broad-based tax cut in the face of what the governor himself, in justifying the bill, calls “the perception and reality of New York as a high-tax state,” plenty of New Yorkers would be cheering for him.

Alas, the governor, having already hit New Yorkers who earn more than $2 million annually with an estimated $1.9 billion-a-year tax increase, is not proposing to actually make New York “tax free” or even to cut taxes for all taxpayers. Instead the proposal that has the CEOs cheering would offer tax breaks to businesses that locate on or adjacent to a State University of New York campus. The employees of those businesses would have their wages be exempt from state income taxes for five years, and the businesses themselves would not have to pay sales tax or property tax for ten years.""

There is always a catch and this were the Marxist Central Planning comes in.

"The catch is that, to qualify for the tax benefits, not only does the business have to be where the governor wants it, it has to be in a sector that the governor approves. “Certain types of businesses are prohibited from participating in this program, including retail, real estate, and professional services type businesses,” the governor’s memo in support of the bill says."

Arguments against

"Plenty of people are willing to call this what it is. A Republican state assemblyman from Staten Island, Joe Borelli, called Cuomo’s plan “one of the most disingenuous I have ever heard.” According to the Staten Island Advance, Borelli said, “It acknowledges that New York's tax structure is crippling business and then does nothing to address it. The fundamental flaw with this proposal is that it allows Cuomo and [Assembly Speaker Sheldon] Silver appointees to pick and choose which businesses get sweetheart deals, as every other existing business in this state suffers.” The New York Post, whose conservative editorial page usually likes tax cuts, editorialized against the governor’s “Tax-Free New York” plan."

Arguments for from the QE welfare queens


"Yet the big business leaders are lining up to support it. “Tax-Free NY is the type of visionary thinking we need from our leaders,” said the CEO of JPMorgan Chase, Jamie Dimon, in a quote distributed by the governor’s office. “I applaud Governor Cuomo for taking this initiative to help spur the state's economy,” said the CEO of GE, Jeffrey Immelt. The CEO of Goldman Sachs, Lloyd Blankfein, tweeted that it is a “thoughtful, smart plan to help drive private sector investment in NY, deserves support.” Hint that investment needs financing..........

GE, Goldman Sachs, and JPMorgan Chase have the size, influence, and lobbying juice to get special deals from the state when they need or want them. They do plenty of municipal bond business with the state. Maybe the governor asked for their support, and maybe they figured any move toward tax relief, even on a small scale, can’t hurt. And maybe ten years from now SUNY campuses will be surrounded with new high-tech firms like the ones that border MIT and Stanford rather than by rural voters annoyed at Governor Cuomo for his support of gun control." Perhaps."

Will they hold back financing for companies and non approved Centrally Planned industries they choose by using said influence to control the markets kind of like what JPM and GS do now with their HFT platforms levitating the stock market dangerously higher than it should be based on real tangible underlying assets.

The next question is what is Cuomo's personal angle besides political aspirations well here it is

"But in researching Governor Andrew Cuomo’s “Tax-Free New York” plan I came across a 1994 New York Times article headlined “21 Enterprise Zones Created, Including 4 in New York City.” It reported that “Under the state program, which was first established in 1986, businesses that locate in designated areas of high unemployment and poverty are eligible for a mix of tax credits, low-interest loans, reduced property taxes and discount utility bills.” Among the new zones were those in Buffalo and the Brooklyn neighborhood of East New York, which haven’t exactly been beacons of prosperity since Andrew Cuomo’s father, Governor Mario Cuomo, designated them nearly 20 years ago. In fairness, plenty of more conservative New York politicians supported enterprise zones, too — they were a favorite of Republican congressman Jack Kemp, who, like Andrew Cuomo, served in the federal department of Housing and Urban Development."


"Some businessmen with the patience and capital to navigate the complexity of the state’s political process and regulations may find the tax-free New York plan a good deal for them. But others may conclude that by moving either out of state or offshore, they can find a low-tax environment that doesn’t expire in five or ten years and that doesn’t require jumping through a lot of special hoops set up by the governor."

Not very business friendly when you think about it and smacks more of welfare for big business and Central Planning approved companies and industries but the average rube will see tax free and not bother to dig deeper.

For anyone who wants to read the actual legal stuff.


Tue, 06/18/2013 - 10:13 | 3667799 Dr. Engali
Dr. Engali's picture

You mean to tell me that promising people that they can make more during retirement, and remain in retirement longer than they have worked comes with consequences? No fucking shit!

Tue, 06/18/2013 - 10:19 | 3667832 ElvisDog
ElvisDog's picture

I know quite a few people working for local government who retired in their early 50's counting on their generous pensions (and usually health care benefits) to provide for them for the last 30 years of their lives. I always thought it was a little risky counting on government leaders not to overpromise and bankrupt their systems aka Detroit over that period of time. If I mention anything along these lines, the response is invariably that they are lawfully entitled to their full pensions, the benefits are "mandated", and so on.

Tue, 06/18/2013 - 11:32 | 3668242 Almost Solvent
Almost Solvent's picture

Everyone has a plan till they get punched in the face

Tue, 06/18/2013 - 10:16 | 3667821 Seasmoke
Seasmoke's picture

What ZIRP gives , ZIRP takes away .....

Tue, 06/18/2013 - 10:22 | 3667851 AGoldhamster
AGoldhamster's picture

As long as the sheeple have Hamburgers, chips and TV - all is well in America.

Tue, 06/18/2013 - 10:22 | 3667856 Savvy
Savvy's picture

"investing in risky development projects around the city and loans that will never be repaid."


Cui bono?

Tue, 06/18/2013 - 10:30 | 3667906 Van Halen
Van Halen's picture

So what's the latest on the plan to raid the Detroit art collection?


Tue, 06/18/2013 - 10:39 | 3667971 Uncle Remus
Uncle Remus's picture

What? Your own town's graffiti not up to par?

Tue, 06/18/2013 - 10:41 | 3667987 Peachfuzz
Peachfuzz's picture

Blocked sale @ MI senate. Apparently Cheesepopes don't like modern affirmative action art....

Tue, 06/18/2013 - 10:34 | 3667942 Darkside
Darkside's picture

These people don't realize their pensions are gone and what little is left is being used to bail out the city. 10 cents on the dollar fuckit you invested in shit you get shit its worth 0 go bankrupt start over. ITS OVER

Tue, 06/18/2013 - 10:37 | 3667967 Yancey Ward
Yancey Ward's picture

One of the proposed pension measures is to require all beneficiaries to live within the boundaries of Old Detroit 365 days a year- to be monitored by ankle bracelet.  It is expected to solve the underfunding problem within two years due to decreased lifespan.

Tue, 06/18/2013 - 10:40 | 3667976 ebworthen
ebworthen's picture

"The bottom line is not just creditor haircuts but,'significant cuts in accrued, vested pension amounts for both active and currently retired persons.'  "

In other words, theft.

Or slavery.

Tue, 06/18/2013 - 10:45 | 3668002 rosiescenario
rosiescenario's picture

....and just yesterday I had a momentary concern about Ruger being able to maintain its recent sales growth. Well, one less thing to worry about.

Tue, 06/18/2013 - 10:47 | 3668014 shovelhead
shovelhead's picture

Torch it and collect the insurance.

"Yeah, we got a little urban blight...but nothing a little aluminum siding can't fix."

Rocky Balboa.

Tue, 06/18/2013 - 11:23 | 3668196 IridiumRebel
IridiumRebel's picture

Philly? You're on deck.......

Tue, 06/18/2013 - 10:56 | 3668066 j0nx
j0nx's picture

No pensions until age 65. This shit where soldiers, police, firefighters, etc get full pensions after 25 years on the job when they retire at age 45 and receive those benefits until they die is going to end now.

Tue, 06/18/2013 - 10:57 | 3668080 wagthetails
wagthetails's picture

I welcome a "realistic" actuarial assumption, but these reports should also include a worst case scenario.  All they did was bring fantasy land numbers down to normal expectations.  what is normal?

Tue, 06/18/2013 - 11:32 | 3668247 waterhorse
waterhorse's picture

So, in a nutshell these government pensions are actually Enron pensions?

Tue, 06/18/2013 - 11:35 | 3668248 MarsInScorpio
MarsInScorpio's picture

And once again the Wizards of ZH, and the many highly informed and financially experienced posters of ZH, are proven correct.


Those of you who want to trash-talk ZH, there is a place where there is no sunshine that you can use to store your trash-talk.


GS should be so lucky to be correct even half as often as ZH about what is going to happen. But then, maybe that's not fair to GS; if you realize that they are in the business of stealing from their muppets with counter-advice - telling them to do exactly the opposite of what they should do so that GS can counter-move to take advantage of the muppets' foolish trust - well, then maybe GS is batting in the mid-700s.


Regardless of that particular aside, ZH and its posters again prove they have a grip on the Real World. Anyone playing for keeps - and playing honestly, (this includes not getting stolen blind by those who aren’t) and doesn’t read ZH and its posts daily, is a fool.



Tue, 06/18/2013 - 11:36 | 3668261 Satan
Satan's picture

Snake Plissken wouldn't get caught dead in Detroit...

Tue, 06/18/2013 - 14:29 | 3668995 SmittyinLA
SmittyinLA's picture

I thought he was dead 

Tue, 06/18/2013 - 11:51 | 3668309 orangegeek
orangegeek's picture

Call the Fed.



We need MO POMO.

Tue, 06/18/2013 - 11:52 | 3668316 Turdy Brown
Turdy Brown's picture

We American are a pathetic people.  None of these pensioners will do anything to anybody because people are stupid and uninformed.  We are truly SHEEPLE!  Eventually every city in America will be just like Detroit (or worse) and we dumb Americans will do nothing about it! 

Tue, 06/18/2013 - 12:06 | 3668380 Never One Roach
Never One Roach's picture
U.S. Manufacturing Takes The Worst Hit Since June 2009(Forbes)


As many try to minimize the impact of fiscal restraint and the sequester on the U.S. economy, the May manufacturing ISM printed at a contractionary 49%, the lowest reading since June 2009.

Tue, 06/18/2013 - 12:22 | 3668488 vespasolo
vespasolo's picture

Pension plans operate under the same flawed premise as Social Security; that there would be more workers in the furture then in the present to cover retitrees benefits.

As companies became more efficient and productive through mechaniation and automation, not mention outsourcing  the result was fewer workers for same amount of productivity.

The only way to fund a pension plan was to go search for yield in the markets to make up the difference.

Well the markets won.  Not enough in the pensions.


Maybe the idea of pesnions should be tossed out.


We're all just visiting.


Tue, 06/18/2013 - 13:16 | 3668713 dolph9
dolph9's picture

It's not just Detroit, Detroit is the canary in the coal mine.

The whole of America is bankrupt, because Americanism as an idealogy is bankrupt.  Remember, the American idealogy is infinite debt perpetually rolled over at lower and lower rates.

The entirety of our economy is based on interest rates approaching zero bound.  Again, this is the basis of the entire economy.  If interest rates rise, the whole banking and corporate structure falls to the ground.

How can that not result in anything other than systemic breakdown?

Tue, 06/18/2013 - 14:29 | 3668991 W74
W74's picture

(using your analogy) And it'll be too late to run down the tunnels toward the exit.  Not only did the canary die long ago but plenty of citizens have been sounding alarm bells for decades. 

Those who chose to remain in the depths in an effort to chip out residual nuggets left in the taxbase mine after the bulk of the taxbase had hauled outta there, will get what they deserve.

Tue, 06/18/2013 - 13:39 | 3668808 SmittyinLA
SmittyinLA's picture

This is just desserts for police and fire for teaming up with all the other less necessary workers to grow government. 



Tue, 06/18/2013 - 14:08 | 3668917 SmittyinLA
SmittyinLA's picture

What Detroiters don't know YET is they have derivative contract liabilities for the next 30 years, maybe more 

Tue, 06/18/2013 - 14:24 | 3668985 W74
W74's picture

Stick it to 'em.  Detroiters failed to provide proper oversight regarding their local officials and they should pay the price.  If you vote Nigerian Warlords into offices of power what can you expect other than ruin?  They've had plenty of choices and have chosen wrongly for the past 50 years.

Tue, 06/18/2013 - 14:37 | 3669024 Longing for the...
Longing for the old America's picture

The major reason for underfunding was gross overpromising in the amounts for government worker and /or union benefits.

Tue, 06/18/2013 - 14:49 | 3669060 W74
W74's picture

Gross overpromising....for votes.

Tue, 06/18/2013 - 15:00 | 3669096 MassDecep
MassDecep's picture

Brother John goes into detail. very interesting!!

Tue, 06/18/2013 - 14:54 | 3669077 SmittyinLA
SmittyinLA's picture

Wait till the geeks figure out all the "books" they're reviewing are fiction

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