This page has been archived and commenting is disabled.

Bankruptcy In The USSA: Detroit Bondholders About To Be GM'ed In Favor Of Pensioners

Tyler Durden's picture




 

First, the Obama administration showed during the course of the GM and Chrysler bankruptcy proceedings, that when it comes to Most Preferred Voter classes, some unsecured creditors - namely labor unions, and the millions of votes they bring - are more equal than other unsecured creditors - namely bondholders, and the zero votes they bring. Five years later we are about to get a stark reminder that under the superpriority rule of a community organizer for whom "fairness" trumps contract law any day, it is now Detroit's turn to make a mockery of the recovery waterfall. As it turns out, bankrupt Detroit is proposing to favor pension funds at roughly double the rate of bondholders to resolve an estimated $18 billion in long-term obligations, according to a draft of a debt-cutting plan reviewed by The Wall Street Journal.

The breakdown to unsecured stakeholders would be as follows: 40% recovery for pension funds, 20% for unsecured bondholders - all this to the same pari class of unsecured creditors. Because just like in Europe when cashing out on CDS in insolvent nations is prohibited as it would suggest that the entire Eurozone experiment is one epic farce, regardless of how much "political capital" Goldman Sachs has invested in it, so in the US municipal creditors are realizing that in the worst case scenario, they will be layered first and foremost by all those whose votes are critical in keeping this crony administration in power.

According to the WSJ the plan calls for recovery to be divided among the unsecureds amounting to $4.2 billion, more than the originally planned $2 billion to settle claims which included about $11 billion in unsecured debt, including $6 billion in health and other benefits for retirees; $3.5 billion for retiree pensions; and about $530 million in general-obligation bonds.

There is a possibility that final "math" in the Plan of Reorg is changed before the final draft.

It was unclear from the plan reviewed by the Journal whether the city is using all of the same estimates for the money owed to unsecured creditors in its draft plan. A person familiar with the draft plan said the recovery rate for the pension funds could end lower than the balance sheet shows.

 

Details of the plan sent to creditors on Wednesday have been kept under wraps as the city and its debtholders continue to talk in closed-door mediation. The city sent its working draft to creditors in the hopes that the plan with a richer payout might spur some of them to settle with the city individually or, in the least, offer their own suggestions toward modifying the overall proposal, according to another person familiar with the matter.

 

The formal plan is expected to be filed in federal court in Detroit within two weeks, officials said. Creditors will vote on the plan, but the final decision rests with the court.

Still, the probability is that Kevyn Orr has finally gotten cold feet on playing hard ball with the unions. "The proposed plan provides the road map for all parties to resolve all outstanding issues and facilitate the city's efforts to achieve long-term financial health," Detroit Emergency Manager Kevyn Orr said in a statement Wednesday. Mr. Orr's spokesman declined Thursday to comment on the plan's details. Several creditors, who were opposed to the city's early plans to offer creditors, including bondholders and pension funds, less than 20 cents on the dollars owed to them, also declined to comment."

One can only imagine the amount of "Steve Rattnering" that must have gone on behind the scenes, and how much more is still set to happen, for such a skewed plan to pass the bankruptcy judge over creditor objections. Which it will once the president makes a phone call.

Then again, with contract law abrogated as was made very clear with this administration's first steps into the "Fairness Doctrine" back in 2009 and the bankruptcy of GM and Chrysler, nothing can, or should, surprise one any more.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 01/31/2014 - 15:29 | 4388888 negative rates
negative rates's picture

Rule of thumb #1, always pass the costs on to the consumer!

Fri, 01/31/2014 - 15:30 | 4388896 RSloane
RSloane's picture

The response time for a 911 call in Detroit is 58 minutes, in many cases longer. They can't afford any more cops. But they can afford to pay retired cops their pensions. Once in awhile with crystal clarity we can see where the priorities are.

Fri, 01/31/2014 - 15:34 | 4388908 TruthInSunshine
TruthInSunshine's picture

Gil Hill is relieved.

Inspector Todd: Hey Axel, I'm not takin' anymore of this shit from you. You know how much this little stunt of yours is gonna cost this city?

Axel Foley: I don't think cost is the issue here, sir. I think the issue should be my blatant disregard for proper procedure.

Inspector Todd: You damn right, wise ass! The mayor called the Chief, the Chief called the Deputy Chief, the Deputy Chief just chewed my ass out! You see I don't have any bit of it left, don't you?

Fri, 01/31/2014 - 15:35 | 4388920 Pladizow
Pladizow's picture

I cant wait to get fucked by MYra!

Fri, 01/31/2014 - 15:35 | 4388927 Almost Solvent
Almost Solvent's picture

Fuck O'Choomo but this is Kevin Orr & the MI Gov. proposing this plan.

 

The whole system is a fucking epic disaster - can't wait to see them fighting over this shit in Boca Raton :)

Fri, 01/31/2014 - 15:36 | 4388938 Xibalba
Xibalba's picture

If he ends the prohibition on weed I'm voting for him again!

 

 

 

/:)

Fri, 01/31/2014 - 15:41 | 4388959 Grande Tetons
Grande Tetons's picture

If all goes to plan...you will not have to vote. He, our leader, will just be there.

At that point getting high will be mandatory. 

Fri, 01/31/2014 - 15:47 | 4388990 ZerOhead
ZerOhead's picture

$50 bucks says there will be nothing left for either pensioners or bondhoilders once the lawyers have at it...

Fri, 01/31/2014 - 15:48 | 4388996 CrazyCooter
CrazyCooter's picture

Who all is in the image at the bottom of the post. I can't figure out who is on the far left, but after that it looks like marx, lenin, stalin, mao, and obama.

Regards,

Cooter

Fri, 01/31/2014 - 15:51 | 4389005 ZerOhead
ZerOhead's picture

Looks like Moses to me...

Fri, 01/31/2014 - 16:32 | 4389193 dryam
dryam's picture

Meredith Whitney won't lose any money over this deal.

Fri, 01/31/2014 - 22:47 | 4390400 knukles
knukles's picture

She's a fox, married to a pro boxer...

If they fuck-ola the bond holders, at some point there will be nobody to buy munis meaning the whole fucking charade falls apart.

Until Obie declares everything nationalized

Cloward Piven Foreward

Fri, 01/31/2014 - 17:10 | 4389306 Son of Loki
Son of Loki's picture

It's only Fair!

...wait a sec.....what does this forebode for Treazuree bond holders?

Fri, 01/31/2014 - 15:54 | 4389008 Four chan
Four chan's picture

if you were stupid enough to buy detroit bonds you deserve to be shithammered.

 

also, those pensioners, are police and firemen, who risked their lives in this most

dangerous city in america, its wrong for them to get fucked, while the bankers

who created the money out of thin air, and zero effort, skate away with a big piece of pie.

Fri, 01/31/2014 - 16:09 | 4389069 LawsofPhysics
LawsofPhysics's picture

I know several firemen and policemen, "risking their lives" is a bit dramatic.  If it's so fucking bad, they can go serve in Afghanistan.

I agree, holding any Detroit debt is insane, but when the municipailites and utility companies leave, then they might start risking their lives considerably more often.  There are always exceptions, but where will the taxes and money come from to pay for all the essential services which are about to get considerably more expensive?  The youth of detroit sure as hell are not working.  Perhaps they will wake the fuck up and execute some fucking bankers.  I won't hold my breath.

 

by the way, many of those "bondholders" are in fact pension funds.  So good luck with that circular reasoning.

Fri, 01/31/2014 - 16:30 | 4389183 RSloane
RSloane's picture

Yup Laws. Pension holders and bond holders are not exclusive in this case. Everyone yelling "fuck the bond holders" might as well be yelling "fuck the pensioners".

I have no idea how much money has been set aside for the payment to utility companies and municipality services. The fed gov't spends a lot of money on states to make sure people's lights and heat are not shut off due to lack of payment. Judging by how the city has been run over the years, I don't have a lot of confidence in their possible contingency planning.

Sat, 02/01/2014 - 15:12 | 4391588 Rafferty
Rafferty's picture

Anyone buying Detroilet bonds deserves what he gets.

Fri, 01/31/2014 - 16:40 | 4389202 Duke of Earl
Duke of Earl's picture

2011 homocide rate of:

 

Detroit citizens: 49.2

Detroit police: 28.8

Per 100,000 (multiplied the police numbers up)

 

Seems ordinary citizens are risking their lives more than officers....

Fri, 01/31/2014 - 17:09 | 4389284 RSloane
RSloane's picture

The average case solving in Detroit is 9% including violent crimes, which means 91% of crimes in Detroit go unsolved.

"Detroit — If more citizens were armed, criminals would think twice about attacking them, Detroit Police Chief James Craig said Thursday. - See more at: http://calwatchdog.com/2014/01/03/detroit-police-chief-former-lapd-cop-c..."

So here is their police chief urging citizens to arm themselves, which is highly unusual in the current anti-gun environment. Itsn't that a tip off that something is horribly wrong or maybe horribly right for people who can't expect that a 911 call be answered in under an hour?

People sometimes talk about Detroit as if its devoid of a population. While the unions and muni bond holders [often the same person] pick over the leavings, no one is talking about the people who still actually live there. They are planting gardens in once populated areas so they can grown their own food and put some of the abandoned land to good use. Citizens are picking up trash by themselves to keep their streets as clean as possible. Some of them are locking and shuttering abandoned homes themselves to keep kids out of them.

Don't they deserve at least some consideration?

Fri, 01/31/2014 - 22:50 | 4390404 knukles
knukles's picture

Most cops I know of, even out here in CA are in favor of the populace arming themselves.
It's the Progressive Politicians that ain't

And on to New Yawk...

 

From the New Yawk Post (the t is silent) "A total of 334 people were murdered in New York City last year, only 29 of them by strangers.  That's down from more than 2,245 murders in 1990, and the lowest number of murders in the city on record"   Good luck Mr Mayor DeBlowzio
I'll take the over.
Sat, 02/01/2014 - 00:54 | 4390626 Miffed Microbio...
Miffed Microbiologist's picture

The problem I have with that stat Knicks is that a murder is only classified as such when the person actually dies. Trauma care today in New York (I am assuming) is much better than in the 1990s due to advances in technology. What would be interesting to see for me is if the rate of shooting and stabbings have decreased as well to get a more accurate assessment if crime has decreased.

Miffed;-)

Sat, 02/01/2014 - 15:13 | 4391592 Rafferty
Rafferty's picture

"Don't they deserve at least some consideration?"

 

Plain answer, NO:  They're all members of thr Free Shit Army and kept voting in the officials and politicians who ruined the city.

Sun, 02/02/2014 - 01:42 | 4392973 rockface
rockface's picture

Most of them voted for this over and over and apparently finally got what they wanted.  People that didn't want it moved on long ago.

Fri, 01/31/2014 - 16:07 | 4389085 Swarmee
Swarmee's picture

What about all the asshats who made unfunded promises over the years to these pensioners? Absolutely no legal reprecussions. Ok fine, that how the rules were written at the time, but what are we doing to change it going forward? Nothing that I've seen or heard. This is how you buy votes with the money of the unborn, and it shouldn't be allowed.
People agreed to the terms of employment with the pensions as part of that, if they were not part of the equation or risks were properly disclosed then it might have changed people's minds. Regardless of if the pensions as offered were 'reasonable' or 'fair' (I do not know the pension terms nor attempt to define what amount would be fair) the fact is they were part of the terms of compensation for the jobs. Why do we let officials get away with making promises they will never be held responsible for?
I'm curious what the breakdown in current income levels is for these pensioners as well. While the are probably a few who are just fine, I'm guessing the majority of these people were counting on this money that was contractually promised to them for their employment. If the funds are going to be unevenly distributed anyway then at least means-test the receivers and assign payments according to need. Rich bond holders speculating on Detroit debt will survive a lot better than a retired firefighter with no others income. Case by case basis if pari distribution is already thrown to the wind.

Fri, 01/31/2014 - 16:31 | 4389182 headhunt
headhunt's picture

These 'promises' where made by moron democrat politicians buying votes.

These 'promises' were made by moron union hacks threatening to stop all services to the public.

In democrat run cities it is circular blow job logic.

Fri, 01/31/2014 - 16:46 | 4389231 Swarmee
Swarmee's picture

Right, so what are we, as a society, going to do to rework the laws to prevent this going forward? Assigning blame in hindsight fixes nothing.
Second, either we have a representative democratic republic and accept that, or admit that the structure needs to change. The fuck good does it do to blame one party or another when the outcome isn't in your favor? I have no love for either established party in this country, they have demonstrated time and again they willingly take turns robbing the republic and use emotional issues as a wedge to garner votes while either agreeing on or ignoring mo pertinent issues of substance.
Rather than whine about red this or blue that the laws need to be rewritten to remove vote-buying and empty promises from being a tool of any party. Campaign promises should be enforceable and if they are abandoned then automatic removal from office as that politician was voted in based on those statements. Further, any unfunded liability should be forbidden, period. If something cannot be pre funded then the most mathematically conservative models should be used to account for investment growth with multiple mandatory audits and adjustments at regular intervals. None of this spend ten trillion today but cutting 100 million over ten years. No more choosing top theoretical rate of return to justify pension underfunding, etc. it's obvious these accounting gimmics have been and are used to make hyper optimistic promises which could only be reached in the best case, meanwhile the politicians brokering those deals know they will be long out of office when it defaults, or can't be held liable regardless. Is fucking easy to spend other people's money when you can't be held accountable.

Fri, 01/31/2014 - 17:04 | 4389286 headhunt
headhunt's picture

The structure which needs changed is the elimination of unions in any government position.

It is corruption waiting to be corrupted (that is corruption squared).

These Ponzi scheme promises can go on for decades, as in Detroit, NY, California (pick a major city) when the politicians and the unions are complicit in the theft of taxes - i.e. citizens hard earned dollars.

 

I know, I know; 'what about the children!!'. They are fucked by decades of political and union theft.

 

Fri, 01/31/2014 - 17:29 | 4389390 Dingleberry
Dingleberry's picture

Swarm needs to do a little more digging into how the city was ran, the unions funded, the pubic workers and their political machine.

Swarm will rather quickly come to the conclusion that anyone who is familiar with this situation does, and find his sympathy is perhaps misplaced.

 

Fri, 01/31/2014 - 18:42 | 4389419 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Unions need to be voluntary associations not mandatory ones for starters. Workers like anyone else should be able to voluntarily if enough choose to do so group together to negotiate better deals. Problem is the unions are mandatory competition crushing corrupt backdoored piggy banks that workers have no choice but to join because they have monopolies on the labor pool for certain jobs and stiffle free market labor competition for better workers for starters. If one side can associate to crush wages the other side should be able to associate to counter it. Bigger problem is when both sides are a bunch of corrupt shitbag each parry corrupts the whole overall system with each action until it collapses.

Corrupted individuals are the root of all these problems on all sides the coin here. Once enough of them overrun insitutions like cockroaches they weaken the institutions to the point non-corrupted individuals pretty much don't have a chance in hell of righting the ship if they don't become corrupted by the whole mess in the first place before they are in position to do anything.

And this is why everything must fail and implode because we've passed that point of no return with all these institutions being corrupted beyond repair because there too many corrupted individuals to deal with first before any long term meaningfull solutions can be implemented.

 

 

Sun, 02/02/2014 - 01:43 | 4392975 rockface
rockface's picture

Many assigned blame in foresight but the same morons still voted to enrich themselves with other people money for 50 years.  Just like what's going on with Obama right now.

Mon, 02/03/2014 - 00:00 | 4394856 modest_proposal
modest_proposal's picture

The key here is 'empty promises'. Going forward, we're going to see a lot more politicians get turfed out when they fail to fund pensions. Promising a pension hike will no longer be a reason to feel assured of civil servant support - in fact, such empty promises will become a liability if not promptly followed by concrete spends to cement the promise.

Fri, 01/31/2014 - 16:53 | 4389249 Offthebeach
Offthebeach's picture

What about all the taxpaying citizens and businesses that said they had lived all their lives in Detroit, plowed back into local businesses and could n't survive if the cop/fireman/teach unions kept pushing up taxes for their salaries?
The last thirty years unions have been little more than asset strippers. Jackels on the prostrate public body.

Fri, 01/31/2014 - 18:27 | 4389607 Nick Jihad
Nick Jihad's picture

I especially like how the unions that conspired with politicians to double-cross the taxpayers, are so surprised when those same politicians double-cross them.

Fri, 01/31/2014 - 16:18 | 4389136 RafterManFMJ
RafterManFMJ's picture

Oh God another cop apologist. Go fellate one, worship your master, on your knees.

Fri, 01/31/2014 - 16:19 | 4389137 cynicalskeptic
cynicalskeptic's picture

Counterpoint - Detroit was paying out EXTRA amounts to pensioners for years  - a 13th monthly payment - when they felt they had 'extra' money. Almost $2 BILLION extra was paid out to pensioners over 20 odd years

I call BS.  That money, coming in when investments were performing well SHOULD have been kept in the system to earn more.  Those running things in Detroit clearly had NO IDEA of how things were supposed to be run.  'Extra' payments?  WTF?

Workers deserve their pensions - reasonable pensions  (not the maxed out make as much as you can in your final year to double your final year's earnings and double your resulting pension).  Too many corporate pension funds have been looted dumping those obligations onto taxpayers.  And - in marked contrast - too many government pensions are absurdly generous with politicians earning pensions for minimal years of service on various governmental boards and such.  'Average' workers get to pad theri pensions with final year boosts in earnings and other gimmicks.   

The problem is GREED - all around.  Detroit pensioners deserve a pension but they NEVER should have gotten EXTRA payments much less grown to view those extra payments as a 'right'

Those extra paymeents should be clawed back as much as the bonuses paid to bankers bailed out wioth TARP funds clawed back

 

http://www.thenewamerican.com/usnews/crime/item/16626-detroit-s-bankrupt...

http://www.bloomberg.com/news/2013-09-26/detroit-union-seeks-to-revive-1...

http://dealbook.nytimes.com/2013/10/22/case-in-detroit-highlights-costs-...

Fri, 01/31/2014 - 17:23 | 4389365 CheapBastard
CheapBastard's picture
Database: Which muni bond funds hold Detroit bonds?(as of June 2013)

 

http://www.freep.com/article/20130613/NEWS03/130612016/Database-Which-mu...

 

 

Fri, 01/31/2014 - 15:56 | 4389021 john39
john39's picture

Engels

Fri, 01/31/2014 - 16:24 | 4389157 CrazyCooter
CrazyCooter's picture

Thank you. I had that picture put on a good quality, long sleeve t-shirt and gave to my dad. He is tough to buy for at the holidays, so usually I don't because he doesn't want anything. He couldn't wait to wear it to the gym, so that is a win LOL!

To the point, neither of us could figure out who it was. My best guess was that it was a double image of Marx to go with the Marx Brother's theme, but I was pretty sure I was wrong!

Regards,

Stuart

Fri, 01/31/2014 - 15:59 | 4389055 ShorTed
ShorTed's picture

Friedrich Engles, Marx's butt buddy.

Fri, 01/31/2014 - 16:14 | 4389120 Steve in Greensboro
Steve in Greensboro's picture

The images are Marx, Engels, Lenin, Stalin, Mao and Bathhouse Barry.

Engels was the guy who sold weed to Marx.

Fri, 01/31/2014 - 16:27 | 4389170 SF beatnik
SF beatnik's picture

Cooter:

 

It's Jesus, the first great socialist.

 

Praise Jesus.

Fri, 01/31/2014 - 16:53 | 4389238 Dapper Dan
Dapper Dan's picture

I'm going with Friedrich Engels as the one before Marx

 http://upload.wikimedia.org/wikipedia/commons/7/79/Marx_and_Engels.jpg

Fri, 01/31/2014 - 17:29 | 4389387 akak
akak's picture

And here I just assumed he was one of those guys from Duck Dynasty.

Fri, 01/31/2014 - 18:18 | 4389575 Nick Jihad
Nick Jihad's picture

I think the far left is Marx, followed by Engels.

Fri, 01/31/2014 - 21:01 | 4390124 cheetahbaby
cheetahbaby's picture

Engels. The intellectual godfather of this mess was Hegel. POS....

Fri, 01/31/2014 - 15:37 | 4388947 Joe Davola
Joe Davola's picture

See - another reason not to invest your retirement funds in non-Treasury backed bonds.

Fri, 01/31/2014 - 16:01 | 4389062 ArkansasAngie
ArkansasAngie's picture

Rule #1 Never ... ever ... invest in muni's.

If they are going to abridge the law ... well ... they can shove their next issue up Obama's arse.

Fri, 01/31/2014 - 16:17 | 4389132 NihilistZero
NihilistZero's picture

Will the law be changed so Aunt Yellen can buy up all these Muni Bonds?

Fri, 01/31/2014 - 16:27 | 4389169 John Law Lives
John Law Lives's picture

This is absolute bollocks.  This is a completely uneducated comment.  I have owned munis since the 1980s and never lost a single dollar in principal to default... ever.

Fri, 01/31/2014 - 16:36 | 4389198 headhunt
headhunt's picture

So have I  - until GMC....

Fri, 01/31/2014 - 16:48 | 4389232 John Law Lives
John Law Lives's picture

The historical default rate of general obligation bonds (in particular) is exceptionally low.  Pointing to examples like Detoilet as "evidence" that munis are a bad investment is sophomoric.  Not every municipality in the US is comparable to Detoilet.  As a matter of fact, I once lived in Detoilet (employer transferred me there).  While I wouldn't touch their muni bonds with a ten foot pole, I still own some munis issued in other states (Texas in particular).  Never lost a dollar of principal to default in ~30 years of owning various munis.

Fri, 01/31/2014 - 18:05 | 4389534 Dingleberry
Dingleberry's picture

And RE never went down either....until it did.

If you park your money in a blue state or city, you are not getting paid for the risk.

 

Fri, 01/31/2014 - 19:24 | 4389834 John Law Lives
John Law Lives's picture

RE can not be directly compared to munis as an investment class.  There are many different factors re. these different types of assets.

Fri, 01/31/2014 - 18:22 | 4389582 Nick Jihad
Nick Jihad's picture

In fact, you really have to wonder who was buying Detroit munis, which has obviously been circling the drain for all of my adult life. Perhaps the bondholders are Dem insiders who bought them cheap before 2010, expecting Obama/Reid/Pelosi to arrange a federal bailout? In that case, I have less sympathy.

Fri, 01/31/2014 - 19:23 | 4389837 John Law Lives
John Law Lives's picture

Whoever the bondholders are, it seems they didn't do their proper DD.

Fri, 01/31/2014 - 16:32 | 4389185 unplugged
unplugged's picture

In this lawless enviroment why invest in ANYTHING that has a counterparty?  That is just asking to get your money stolen. "Here's my money - steal it - I'm a dumb ass sheep!"

Fri, 01/31/2014 - 16:49 | 4389233 Mr Pink
Mr Pink's picture

Those baby boomers NEED their pensions. They need their trips to Vegas, they need a new car every 3 years, they need to dine out 5 nights a week, they need a vacation home, they need an RV...

They worked really hard until they were 55 and damn it, they deserve it!

Sun, 02/02/2014 - 14:26 | 4393683 fedupwhiteguy
fedupwhiteguy's picture

generational conflict is not going to solve this problem. You should keep you eye on the true adversary and when the time comes put your crosshairs on them. The ultra elite and their minions are the target buddy!

Fri, 01/31/2014 - 15:35 | 4388933 Xibalba
Xibalba's picture

3 more years....Long way to go. 

Fri, 01/31/2014 - 15:36 | 4388921 Almost Solvent
Almost Solvent's picture

Dup

Fri, 01/31/2014 - 15:39 | 4388943 Occident Mortal
Occident Mortal's picture

This is interesting.

So for car companies and cities, pensions holders trump bond holders...?

But for banks...

Bond holders trump... Depositors!!?!!!

Why have a savings account when you can buy corporate bonds in the same TBTF bank and get more protection and a yield of circa 6%.

The whole world is bullshit now.

Fri, 01/31/2014 - 16:11 | 4389073 LawsofPhysics
LawsofPhysics's picture

I have been saying this for years.  If you insist on buying any bond, buy the banks bonds, it will not fail and it will pay you the interest you lost on your savings.

Fri, 01/31/2014 - 17:13 | 4389313 A Nanny Moose
A Nanny Moose's picture

rock paper scissors lizard spock

Sun, 02/02/2014 - 14:29 | 4393693 fedupwhiteguy
fedupwhiteguy's picture

good one! its all a crap shoot. DD doesn't seem to work when the head nigga threatens to change the rules for fairness. might as well just:

 

http://www.youtube.com/watch?v=iapcKVn7DdY

Fri, 01/31/2014 - 15:39 | 4388958 RSloane
RSloane's picture

LOL Truth I think that movie was shot when Detroit was still alive.

Fri, 01/31/2014 - 15:37 | 4388937 Hippocratic Oaf
Hippocratic Oaf's picture

Unsecured BHer's can expect north of .20

Insured will have to rely on the ins. co.

At least they'll get something as opposed to the monkey hammer that GM BHer's got.....which was shit!

Fri, 01/31/2014 - 15:43 | 4388966 LMAOLORI
LMAOLORI's picture

 

 

Detroit has been a cesspool for years - those residents should have been careful what they wished for. As they say a gun in hand is better than a cop on the phone.

Gun Control Facts: Detroit Crime Rate is the Result Of Gun Control
Fri, 01/31/2014 - 15:51 | 4389002 Smegley Wanxalot
Smegley Wanxalot's picture

The govt cronies win either way. Retired cops will vote for the crony admin, and people who end up dead because the cops didn't show ... also vote for the crony admin.

Fri, 01/31/2014 - 16:13 | 4389113 Bangin7GramRocks
Bangin7GramRocks's picture

You are right. We should pay the banker leeches and vultures full freight as usual. Don't worry, the city art collection and anything else of value will be given to the bankers.

Fri, 01/31/2014 - 15:29 | 4388890 unplugged
unplugged's picture

Awesome!  So the dumbfucks who bought Detroit debt are about to get what they asked for, good and hard!  HAHAHAHA!!

Fri, 01/31/2014 - 15:31 | 4388898 Timmay
Timmay's picture

How do Muni bond yields not skyrocket if this goes through??

Fri, 01/31/2014 - 15:34 | 4388922 fonzannoon
fonzannoon's picture

because this is Detroit we are talking aboit. This could never happen (insert name) here.

Fri, 01/31/2014 - 15:37 | 4388945 Spastica Rex
Spastica Rex's picture

Easter Island

oops...

Fri, 01/31/2014 - 15:42 | 4388971 RSloane
RSloane's picture

Pretty much, Fonz. It could never happen anywhere except where it has already happened!

Fri, 01/31/2014 - 15:55 | 4389028 Professorlocknload
Professorlocknload's picture

Hey, hey,,,California will be saved! By everyone on the continent. Calpers is partying hearty. High Speed Rails, Prius' and Latte' for all.

Gonna make Detroit look trivial.

So, what in hell is holding up confidence in this clusterfuck? When does it all vaporize?

Fri, 01/31/2014 - 16:09 | 4389103 Spastica Rex
Spastica Rex's picture

It doesn't vaporize, it oxidizes. Slowly. Like rust.

Fri, 01/31/2014 - 17:06 | 4389294 Greenskeeper_Carl
Greenskeeper_Carl's picture

This could never happen here, Stockton is a great city in the state of true progressive enlightenment.

Fri, 01/31/2014 - 15:34 | 4388924 NotApplicable
NotApplicable's picture

Please do not worry. Old Yellen is at the con.

Fri, 01/31/2014 - 15:40 | 4388956 Tinky
Tinky's picture

It's a one-off, obviously.

Fri, 01/31/2014 - 15:40 | 4388957 lasvegaspersona
lasvegaspersona's picture

My guess is that no one cares about the distant (next month) future. The end is nigh and only today counts.

I (and most of you) have been saying or at least thinking this for 5 years. This time we will be right (or I'll be wrong again for about the 20th time).

Eventually all things return to Earth.

Fri, 01/31/2014 - 15:43 | 4388972 kralizec
kralizec's picture

Let it burn.

Fri, 01/31/2014 - 16:25 | 4389154 RafterManFMJ
RafterManFMJ's picture

Fire...cleanses...

Fri, 01/31/2014 - 20:53 | 4390095 stormsailor
stormsailor's picture

wow, that one made me belly laugh so hard i have tears in my eyes and my sides are hurting.

 

+10000

 

 

ps  if they were to cut off the gibbs for a couple of months, it would look like hannibal raised the city. burned it and plowed in salt

 

+100 for the offhand laurence of arabia quote.

Fri, 01/31/2014 - 15:33 | 4388909 Ivanovich
Ivanovich's picture

You're not getting the point apparently.  The dumbfucks who bought the debt should get the shaft, but fairly. 

Fri, 01/31/2014 - 18:50 | 4389717 ejmoosa
ejmoosa's picture

Only after the dumbfucks who demanded fantasy pensions and salaries in a city they clearly saw going down the drain get the shaft first....

Fri, 01/31/2014 - 15:43 | 4388961 Dr. Engali
Dr. Engali's picture

uhmmmmm.. I believe the point is that once again the rule of law has been broken. I guess we should just expect that at this point.

Fri, 01/31/2014 - 15:58 | 4389038 RSloane
RSloane's picture

Somewhere Meredith Whitney is laughing her ass off.

Fri, 01/31/2014 - 17:07 | 4389299 Greenskeeper_Carl
Greenskeeper_Carl's picture

She probably is, but she will never get credit, nor will anyone mainstream as her questions like how she knew this would happen when no one else saw it coming. She will be ignored. Peter schiff, Ron Paul, Michael burry etc.

Fri, 01/31/2014 - 16:22 | 4389147 Bangin7GramRocks
Bangin7GramRocks's picture

Other than AIG bonus "contracts", when was the last time rule of law was followed? The Tyler's have highlighted 15 times in the last 3 years when the world economy should have crumbled. The rules were changes, laws were broken and the ponzi rolls on. Fuck you to any Detroit bond holder. Should've sold after RoboCop came out 30 years ago!

Fri, 01/31/2014 - 16:23 | 4389150 unplugged
unplugged's picture

one has to be aware of the environment (lawless) and invest accordingly - I'm not too fond of those who participate in the paper casinos since they are complicit in perpetuating the criminal/lawless environment, knowingly or not - but too bad - I can't wait for the day all the world's paper becomes worthless, rendering the criminals bankrupt (of course except for the ones who secretly stashed away hard assets)

Fri, 01/31/2014 - 15:33 | 4388897 syntaxterror
syntaxterror's picture

Does this mean the property tax on my Detroit property (bought for $234.70) will skyrocket over 50% to $17.50 per year?

Fri, 01/31/2014 - 15:30 | 4388903 the not so migh...
the not so mighty maximiza's picture

good luck selling gov bonds to anyone

Fri, 01/31/2014 - 15:35 | 4388919 CrashisOptimistic
CrashisOptimistic's picture

Yup, there must be just so much tax revenue out there that no one will ever again need to float a muni issue.

Fri, 01/31/2014 - 15:35 | 4388935 the not so migh...
the not so mighty maximiza's picture

this woud speed the reckoning, but probably the fed will buy the munis

Fri, 01/31/2014 - 15:45 | 4388980 lasvegaspersona
lasvegaspersona's picture

If the Feds are to buy munis they will have to restate the budget. Currently they are trying to cut back.

My guess is that they will if they get the chance. In this derivative world however things might go bad fast. There might not even be time to screw things up with standard, run of the mill, everyday, Zimbabwe led the way, Reichsmark hooray, blue dollar payday...hyperinflation.

Fri, 01/31/2014 - 16:08 | 4389097 Professorlocknload
Professorlocknload's picture

Going to put all that fine muni upholstery stuffing in MyRA's. Then borrow even more on it all.  Must achieve the utopian goal of double digit price increases to reach Nirvana.

Fri, 01/31/2014 - 15:58 | 4389040 CrashisOptimistic
CrashisOptimistic's picture

This was investigated.

It is explicitly illegal for the Fed to buy munis.  Pretty big obstacles to changing the law.

Fri, 01/31/2014 - 16:19 | 4389138 LMAOLORI
LMAOLORI's picture

 

 

There's other ways to bail places out they did it in Puerto Rico

 

The Obama Administration's Backdoor Bailout of Puerto Rico

Fri, 01/31/2014 - 17:01 | 4389271 itstippy
itstippy's picture

Munis are perfectly acceptable as collateral at the Fed Discount Window.

There are ways for the Fed to monetize State & Municipal debt that are both profitable for member banks and provide "needed liquidity" to insolvent munis. 

Fri, 01/31/2014 - 15:43 | 4388977 NotApplicable
NotApplicable's picture

Munis are going the way of the Dodo, thanks to the fine replacements known as "Building America Bonds."

http://www.bloomberg.com/news/2013-10-17/build-america-bonds-biggest-los...

Fri, 01/31/2014 - 16:29 | 4389176 akak
akak's picture

You mean "BULLDOZING America Bonds".

Fri, 01/31/2014 - 15:35 | 4388911 Dr. Engali
Dr. Engali's picture

Oh well that's what CDS are for. The re-insurers are all stable right? Right? Hello.... is this thing on?  Sooner or later everybody is going to get the message that there is no rule of law.

Fri, 01/31/2014 - 15:36 | 4388939 LawsofPhysics
LawsofPhysics's picture

Yes, one also has to wonder how raising capital for future investment will go.

Fri, 01/31/2014 - 15:45 | 4388985 NotApplicable
NotApplicable's picture

I don't think our future has much room for either capital, OR investment.

The only question will be how politically connected one is.

Fri, 01/31/2014 - 16:06 | 4388987 Dr. Engali
Dr. Engali's picture

I beg to differ Laws. There are plenty of rubes out there who will lend money again on the belief that Detroit can now get their act together. Look at how easy is was to get people to throw their funny money back in the casino. Market forces are completely broken.

Fri, 01/31/2014 - 17:14 | 4389331 Greenskeeper_Carl
Greenskeeper_Carl's picture

Agreed doc. Just took a couple years and they piled back in. Many of them probably around the recent top. The attention span of adults in this country is mind blowing.

Fri, 01/31/2014 - 15:59 | 4389047 SDShack
SDShack's picture

As to raising capital "I'll make him an offer he can't refuse."

Fri, 01/31/2014 - 16:00 | 4389052 madcows
madcows's picture

Nah, they'll just get another tax payer bailout, a la AIG.  Leverage to the hilt, and wait for the public to come to the rescue.  In the meantime, it parties in the mediteranean, fast cars, and other luxuries.

Fri, 01/31/2014 - 15:33 | 4388912 mightybillfuji
mightybillfuji's picture

This should have immediate and very interesting effects on Puerto Rico.

 

Things might get more interesting going forward.

Fri, 01/31/2014 - 16:08 | 4389099 max2205
max2205's picture

Aren't there laws against this....oh wait

Fri, 01/31/2014 - 15:33 | 4388913 corporatewhore
corporatewhore's picture

i want that poster

Fri, 01/31/2014 - 15:35 | 4388926 lasvegaspersona
lasvegaspersona's picture

I recognize all the commies (oops...'progressives') except the second. Is that Trotsky? I don't recognize him without the ice axe in the forehead.

Fri, 01/31/2014 - 15:38 | 4388948 Pheonyte
Pheonyte's picture

That's Engles.

Fri, 01/31/2014 - 15:45 | 4388978 Herodotus
Herodotus's picture

Perhaps it is Engels.

Fri, 01/31/2014 - 15:56 | 4389016 fiftybagger
fiftybagger's picture

Marx, Engels, Lenin, Stalin, Mao, Ocommie

Fri, 01/31/2014 - 16:32 | 4389187 akak
akak's picture

In no particular order.

Fri, 01/31/2014 - 15:35 | 4388931 LawsofPhysics
LawsofPhysics's picture

Go ahead, screw the bondholders, and good fucking luck raising any capital in the future.

Fri, 01/31/2014 - 15:41 | 4388964 Almost Solvent
Almost Solvent's picture

The bondholders fucked up when they lent money to Detroit in the first place. Both they and the unions are dumbfuckingnuts for investing in Detroit to being with.

Fri, 01/31/2014 - 15:51 | 4389004 LawsofPhysics
LawsofPhysics's picture

So Detroit is to become a warzone then. no one will do business with detroit, I agree, let the fuckers in detroit eat each other, because the gas and utility companies will be the first to bail.

Fri, 01/31/2014 - 16:28 | 4389167 RafterManFMJ
RafterManFMJ's picture

...become? It's been beyond Thunderdome for at least 20 years. You just thaw out from some .gov stasis chamber?

Fri, 01/31/2014 - 15:56 | 4389030 madcows
madcows's picture

+100.  don't lend to anyone.  Their business model is to borrow, borrow borrow, file for bankruptcy.  Whether it is to buy re-election or to expand business, these morally corrupt A-holes don't get my money.  Oh, and FU detroit.  you get what you voted for.

Fri, 01/31/2014 - 16:22 | 4389146 sixsigma cygnus...
sixsigma cygnusatratus's picture

If there was a lesson to be learned from all this, kicking the can down the road eventually brings you to the cliff.

Fri, 01/31/2014 - 16:32 | 4389194 bogdanlg
bogdanlg's picture

Really enjoy seeing you whine about this!

Fri, 01/31/2014 - 15:36 | 4388932 El Vaquero
El Vaquero's picture

All I can say is that I am glad I'm not involved in any way, shape or form with Detroit.  What a fucking mess.

Fri, 01/31/2014 - 15:38 | 4388942 Spanky
Spanky's picture

+1

Second that...

Fri, 01/31/2014 - 16:06 | 4389087 SmittyinLA
SmittyinLA's picture

Actually the federal govt is a major creditor of Detroit, easily the largest

Fri, 01/31/2014 - 15:36 | 4388936 Spanky
Spanky's picture

So I take it the pensions and benefits were not based on contracts?

Fri, 01/31/2014 - 16:03 | 4389070 SmittyinLA
SmittyinLA's picture

you can't fund a pension with a "contract", they have to be funded with real assets. 

Fri, 01/31/2014 - 16:04 | 4389072 tawdzilla
tawdzilla's picture

yeah, leave it to the lawyers to abandon contract law.  

Fri, 01/31/2014 - 16:04 | 4389074 Bastiat
Bastiat's picture

I'm pretty sure that the bonds were not sold with a lien subordinate to pension claims.  The bankrupcy court just made it so.

Fri, 01/31/2014 - 17:32 | 4389408 Dingleberry
Dingleberry's picture

There are contracts.

There is BK law.

BK law is for contracts that are broken.

Next question.....

Fri, 01/31/2014 - 15:38 | 4388946 toady
toady's picture

Sweet! About time some actual humans got some instead of these damn corporate entitys!

Fri, 01/31/2014 - 15:38 | 4388949 Pumpkin
Pumpkin's picture

Deals with the devil (government) usually don't turn out very well.

Fri, 01/31/2014 - 15:42 | 4388951 buzzsaw99
buzzsaw99's picture

were it up to me bond holders would get nothing

Fri, 01/31/2014 - 16:34 | 4389197 Emergency Ward
Emergency Ward's picture

yeah, fuck any other pension funds that were holding Detroit Munis....

Fri, 01/31/2014 - 18:05 | 4389533 toady
toady's picture

Yep. These things always go the exact opposite of the way they should. The lawyers, corporations, and various scumbags that thought they were going to make a quick buck split the pot, while the rubes that sit in cubes for 20, 30, 40 years get fucked.

But don't kid yourself. The lawyers & various scumbags will get it all again this time. Wait & see.

Fri, 01/31/2014 - 15:40 | 4388953 SheepDog-One
SheepDog-One's picture

Makes becoming a MYRA bondholder, you know...for your cozy retirement, oh so comforting. 

Fri, 01/31/2014 - 15:40 | 4388962 El Vaquero
El Vaquero's picture

Makes sense if your definition of cozy includes getting repeatedly assraped. 

Fri, 01/31/2014 - 17:22 | 4389362 Greenskeeper_Carl
Greenskeeper_Carl's picture

Believe me, the brain dead morons who would invest in that in the first place will never, in a million years, add those things together. Plus, even if they did, the MyRA is backed by yellens printer, Detroit isn't. Obviously we can extrapolate that the printer means everything will be fine.

Fri, 01/31/2014 - 15:40 | 4388965 WTF_247
WTF_247's picture

The true costs of this type of crap will not be seen for 10+ years.  Bondholders will demand much higher coupons if they feel that they willl get screwed in the BK process over and over.  Cities will regret this - they cheer now but it will only make it worse.  One city does not make a trend but my guess is the next few years we will see it emerge - blatant disregard for laws.

Instead of settling for 5% coupon, holders are likely to estimate when and if you might get into financial trouble and then demand 8 or 9% to cover the expected hosing during BK time.  Cities of course cannot handle this level of coupon so they are likely to be in yet further trouble as they are locked out of borrowing their way to prosperity.

Fri, 01/31/2014 - 15:54 | 4389012 LawsofPhysics
LawsofPhysics's picture

Yep, just wait until the utility companies bail on detroit. 

Fri, 01/31/2014 - 16:59 | 4389268 akak
akak's picture

The grocery chains pretty much have already.

Fri, 01/31/2014 - 15:43 | 4388973 Unprepared
Unprepared's picture

I say, the bondholders deserve it. Did they know that in the New New Normal, bail-ins, corzining and vote-buying are real risk sources?

Fri, 01/31/2014 - 15:54 | 4389013 madcows
madcows's picture

I refuse to invest in all bonds, whether government of corporate.

Clearly governments and corporations have no ethics or are retarded.

Why loan money to people who clearly have no interest in paying you back?

buy PM's.  This bitch is going down.

Fri, 01/31/2014 - 16:05 | 4389077 philosophers bone
philosophers bone's picture

Can ZH publish a dictionary of new verbs coming into effect after the financial crisis?  GM'd; Corzined; Amaranth'd, Obama'd; Bernanke'd, etc.?

 

Fri, 01/31/2014 - 15:44 | 4388984 SmittyinLA
SmittyinLA's picture

Where do the illegal swaps" denied creditors" http://dealbook.nytimes.com/2014/01/16/judge-rejects-detroits-deal-to-ex... come in, behind all legitimate creditors? 

Or is that a taboo subject? 

Remember the Ill, Detroit & Fed govt all wanted to throw its union pensioners under the bus to pay off questionable swap holders with unsecured claims with a fresh new loan ahead of all other creditors (made after all creditors) including retired union members. 

Obama's concern for elderly White American Union retiree members is measured in micro-nigga-giveashitz, they voted him in, their stupidity isn't his problem, it's his windfall. 

Obama's business model relies on Americans voting to fuck themselves.

 

Fri, 01/31/2014 - 15:48 | 4388994 NotApplicable
NotApplicable's picture

#AskJPM

Fri, 01/31/2014 - 15:48 | 4388997 whisperin
whisperin's picture

For once I'd like to see some of the institutional debt holders stand up and tell these asshats that since we're not going to follow the rule of law we will consider dumping all debt of troubled governmental and others corporates where the government may want to dictate a precedence other than that established by law!!

Fri, 01/31/2014 - 15:55 | 4389026 SmittyinLA
SmittyinLA's picture

the govt s response has already been imposed, they'll print & buy $85B a month indefinitely, forget that "we're gonna cut $10B a month in new debt spending" bullshit, its a lie, ask Jerry Brown, ask Harry Reid, ask Medicare or Medicaid or ask the US troops in Bor Southern Sudan with their Osprey fleet and Osprey mechanic entourage. 

 

Do NOT follow this link or you will be banned from the site!