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Chicago "Junking" Triggers $2.2 Billion Payment, Deepening Financial Crisis

Tyler Durden's picture




 

In early March, we discussed the rather deplorable state of Illinois’ public pension plans which, we noted, are underfunded by some 60%. On a statewide basis, making up the deficit would cost around $22,000 per household, which gives you an idea of the cost to taxpayers of the grossly underfunded pension liabilities.

A month later, we pointed out the fact that spreads between Chicago’s muni bonds and USTs had blown out to the tune of 60bps as mayor Rahm Emanuel's re-election became more assured. We also highlighted a WSJ graphic showing that when it comes to unfunded public worker pension liabilities per person, nobody does it like Chicago.

The situation worsened materially last Friday when the Illinois Supreme Court struck down a pension reform law that aimed at closing the state’s $105 billion hole. 

Via The Chicago Tribune:

The Illinois Supreme Court on Friday unanimously ruled unconstitutional a landmark state pension law that aimed to scale back government worker benefits to erase a massive $105 billion retirement system debt, sending lawmakers and the new governor back to the negotiating table to try to solve the pressing financial issue.

 

The ruling also reverberated at City Hall, imperiling a similar law Mayor Rahm Emanuel pushed through to shore up two of the four city worker retirement funds and making it more difficult for him to find fixes for police, fire and teacher pension funds that are short billions of dollars.

That ruling, it turns out, would be the death knell for Chicago’s credit rating, at least as far as Moody’s is concerned. Citing “expected growth in the city’s highly elevated unfunded pension liabilities,” the rating agency cut the city to junk at Ba1. This is bad news for Chicago for a number of reasons, not the least of which is the fact that Emanuel was looking to refi nearly a billion dollars in floating rate debt into fixed rate notes and borrow another $200 million to pay off the related swaps — clearly this will now be far more difficult. The ratings agency’s actions also given creditors accelerated payment rights, meaning the city could be on the hook for some $2.2 billion in principal and interest on its outstanding liabilities. 

Needless to say, Rahm Emanuel is not happy. Here’s the Tribune again:

Emanuel attacked Moody's decision to downgrade the city's credit, but his remarks illustrate the grave financial situation the city faces.

 

"This action by Moody's is not only premature, but it is irresponsible to play politics with Chicago's financial future by pushing the city to increase taxes on residents without reform," said Emanuel in a statement, just hours after appearing on the South Side to bask in the formal announcement that President Barack Obama's presidential library would be built in Chicago.

One analyst was sympathetic to the mayor's argument that Moody's acted too quickly, but noted the message being sent about Emanuel's leadership as he enters a second term.

 

"A cut below investment grade is a major statement, implying that there is material risk to the city not paying its bondholders on time or in full," said Matt Fabian, a managing partner at Municipal Market Analytics. "To have gone there without waiting to see the city's approach to the current budget gap, or whether or not they will raise revenues is clear demonstration of a lack of confidence in city management. In other words, they see little reason to wait because they expect little in the way of a management response."

Chicago now has the dubious distinction of being the only city “in recent history” to carry such a low rating other than Detroit:

Ciccarone noted that his firm's data showed Chicago's junk status rating is a level only reached in recent history by one other major city: Detroit, before it filed for bankruptcy in July 2013.

So we’re sorry taxpayers, but it looks like Chicago is going to need you to step up to the plate on this one:

Earlier market analyses have indicated that Chicago, unlike Detroit, has a varied economy and options for raising the needed revenue for righting its financial ship, but it won't be painless. "Raising taxes is going to have to be part of the solution," Ciccarone said.

 

Emanuel and city financial officials tried to downplay the action by Moody's, noting other major debt rating agencies had not downgraded city creditworthiness to such troublesome low levels. Budget Director Alex Holt called Moody's rating "an outlier."

 

For years, Moody's has warned the city about not addressing its pension problems, maintaining an intense focus not shared by other rating agencies, and also warned about city debt practices that Emanuel recently vowed to change.

 

Even so, Emanuel and the City Council last year put off making a decision on whether to enact a significant property tax increase to help cover the city's ballooning pension costs. That deferral came as Emanuel and aldermen prepared to run for re-election this spring.

In the end, this serves to underscore not only the pitiable plight of the country's pension plans (which, by the way, are likely to be far worse off on the whole than meets the eye due to the fact that managers cling to optimistic assumptions about investment returns in order to avoid having to revise the present value of their liabilities sharply higher) but also a worrying trend that we discussed earlier this week — namely, that state and city governments across America are going broke. 

Here's a look at just how underfunded Illinois' pension system truly is:

*  *  *

Moody's statement:

Rating Action: Moody's downgrades Chicago, IL to Ba1, affecting $8.9B of GO, sales, and motor fuel tax debt; outlook negative

Also downgrades senior and second lien water bonds to Baa1 and Baa2 and downgrades senior and second lien sewer bonds to Baa2 and Baa3, affecting $3.8B; outlook negative

New York, May 12, 2015 -- Moody's Investors Service has downgraded to Ba1 from Baa2 the rating on the City of Chicago, IL's $8.1 billion of outstanding general obligation (GO) debt; $542 million of outstanding sales tax revenue debt; and $268 million of outstanding and authorized motor fuel tax revenue debt.

We have also downgraded the following ratings on debt secured by net revenues of Chicago's water and sewer enterprises: to Baa1 from A2 on $38 million of outstanding senior lien water revenue bonds; to Baa2 from A3 on $2.3 billion of outstanding second lien water revenue bonds; to Baa2 from A3 on $35 million of outstanding senior lien sewer revenue bonds; and to Baa3 from Baa1 on $1.5 billion of outstanding second lien sewer revenue bonds.

We have also downgraded to Ba2 from Baa3 the rating on $6 million of outstanding MetraMarket Certificates of Participation (COPs), Series 2010A, and to Ba3 from Ba1 the rating on $3 million of outstanding Fullerton/Milwaukee COPs, Series 2011A.

Finally, we have affirmed the Speculative Grade (SG) short term rating on $112 million of Chicago's outstanding Sales Tax Revenue Refunding Bonds, Series 2002.

The outlook on all long term ratings remains negative.

SUMMARY RATING RATIONALE

The Ba1 rating on Chicago's GO debt incorporates expected growth in the city's highly elevated unfunded pension liabilities. Based on the Illinois Supreme Court's May 8 overturning of the statute that governs the State of Illinois' (A3 negative) pensions, we believe that the city's options for curbing growth in its own unfunded pension liabilities have narrowed considerably. Whether or not the current statutes that govern Chicago's pension plans stand, we expect the costs of servicing Chicago's unfunded liabilities will grow, placing significant strain on the city's financial operations absent commensurate growth in revenue and/or reductions in other expenditures. The magnitude of the budget adjustments that will be required of the city are significant. Furthermore, Chicago's tax base is highly leveraged by the debt and unfunded pension obligations of the city, as well as those of overlapping governments. Balanced against the city's many credit challenges are several attributes, the greatest of which is the city's broad legal authority to tap into its large and diverse tax base for increased revenue.

OUTLOOK

Our negative outlook reflects our expectation that Chicago's credit challenges will continue, both in the near term and in the long term. Immediate credit challenges include potential draws on liquidity associated with rating triggers embedded in the city's letters of credit (LOCs), standby bond purchase agreement (SBPA), lines of credit, direct bank loans, and swaps. The current rating actions give the counterparties of these transactions the option to immediately demand up to $2.2 billion in accelerated principal and accrued interest and associated termination fees. Of this amount, the GO and sales tax revenue rating actions trigger $1.7 billion of potential payments; the second lien water revenue rating action triggers $99 million of potential payments; and the second lien sewer revenue rating action triggers $355 million of potential payments.

The negative outlook also reflects our expectation that Chicago's credit quality will weaken as unfunded liabilities of the Municipal, Laborer, Police, and Fire pension plans grow and exert increased pressure on the city's operating budget. In the near term, Chicago's administration must comply with a 179% contribution increase to its Police and Fire pension plans in 2016.

Developments involving the Municipal and Laborer plans present longer term risks to the city's credit profile. In our opinion, the Illinois Supreme Court's May 8 ruling raises the risk that the statute governing Chicago's Municipal and Laborer pension plans will eventually be overturned. If so, the city's obligation to fund the Municipal and Laborer plans would likely revert to that which existed before the statute took effect in January 2015. Under the prior funding requirements, the city's pension contributions were well below the plans' actuarial requirements. Therefore, if the Municipal and Laborer statute is overturned, and no other adjustments are made to plan revenues and/or expenditures, we believe the plans will continue to extinguish assets to pay annuitants. As the plans move toward insolvency, the city's credit standing will continue to deteriorate, given our view that the state may eventually implement legislation forcing Chicago to pay annuitants directly. Annuitant payments would materially exceed current employer contribution levels. In our view, Chicago's ability and willingness to fund annuitant payments, should they be required of the city, is uncertain.

 

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Wed, 05/13/2015 - 07:53 | 6088763 Latina Lover
Latina Lover's picture

What else does Chicago and Detroit have in common besides crooked politicians and a parasitical bureaucracy draining the body  politic dry?

Wed, 05/13/2015 - 07:55 | 6088769 TruthInSunshine
TruthInSunshine's picture

Maybe Rahm "Dual Citizen but Israeli Firster" Emanuel can borrow money from Israel (that Israel was gifted by CONgress on behalf of U.S. Taxpayers) to stave off bankruptcy of his incredibly corrupt union fiefdom for a few more years?

Wed, 05/13/2015 - 08:00 | 6088781 Atlas_shrugging
Atlas_shrugging's picture

Reality as the final arbiter...couldn't happen to a nicer chap

Wed, 05/13/2015 - 08:22 | 6088818 NoDebt
NoDebt's picture

I feel a lot of "but I was promised!" happening in Chicago the next few years.

The Detroit "template" to be invoked, if I had to guess.  ~30% cut in pensions.  Creditors to be made whole, though.  I'd buy the shit outta those bonds.

 

Wed, 05/13/2015 - 08:49 | 6088903 ThaBigPerm
ThaBigPerm's picture

We junked some folks.

Wed, 05/13/2015 - 08:56 | 6088920 I am more equal...
I am more equal than others's picture

 

 

Maybe Obama can go back and do what he does best, organize the community.  Organize the bread and soup lines, organize the crime, organize the street protests.  Lead the masses, lead on my captain. 

Wed, 05/13/2015 - 09:15 | 6088974 Took Red Pill
Took Red Pill's picture

rahm emanuel for president 2016!

Wed, 05/13/2015 - 09:48 | 6089099 TahoeBilly2012
TahoeBilly2012's picture

"You have to create a crisis (debt) before you never let it go to waste (new world order)"

Wed, 05/13/2015 - 13:05 | 6089820 localsavage
localsavage's picture

We had to unpension some folks.

Wed, 05/13/2015 - 15:14 | 6090316 boattrash
boattrash's picture

Maybe their beloved mayor can find his way to a lamp post, and show us his best Mussolini impression!

Wed, 05/13/2015 - 09:16 | 6088980 Mayer Amschel R...
Mayer Amschel Rothschild's picture

Going according to plans.  Despot of non-USA allegiance in place to oversee martial law when executive order is given.  What's everyone surprised about.

Wed, 05/13/2015 - 09:01 | 6088939 astoriajoe
astoriajoe's picture

Didn't they just try the Detroit template? Or maybe adjusting pensions before bankruptcy is the Chicago Template, to be followed soonafter by the Deteroit template, then maybe the Ferguson template.

We're rich in templates if poor in cash.

Wed, 05/13/2015 - 11:52 | 6089573 max2205
max2205's picture

Coincidence that Moody s and the court waited until after the election to make their move...

 

I don't think so!

 

Chiraq 

Wed, 05/13/2015 - 13:49 | 6089936 t0mmyBerg
t0mmyBerg's picture

saw this coming and we left chicago in 2013.  next up will be loss of services and the degentrification of the city.  if oyu have lived there you know there is all kinds of marginal realestate that pushed out into formerly semi-blighted areas as things got better after the 70s.  The screw has turned and the cycle peaked.  downhill from here.  you dont want to be there when the gangs come back in to reclaim what was theirs

Wed, 05/13/2015 - 08:38 | 6088797 smlbizman
smlbizman's picture

how much of this is staged...you know, never let a crisis go to waste......."if it wasnt for that evil moodys..we wouldnt have to tax the life out of you...

 

and dont forget about my town ten miles down the road....charm city...

Wed, 05/13/2015 - 08:45 | 6088887 Bastiat
Bastiat's picture

Staged?  Read the Moody's report.  Those pension obligations are discounted at a projected rate of return on invested assets.  That rate of return is usually based on a lagging multi-year moving average. How's the fixed income component of that looking?   Of course there could be some exposure to stocks too. . . . realistically, those unfunded pension liabilities are double what you see in that table.

Wed, 05/13/2015 - 08:54 | 6088917 McCormick No. 9
McCormick No. 9's picture

Couldn't happen to a nicer place...

Wed, 05/13/2015 - 11:12 | 6089437 Freddie
Freddie's picture

I have a relative who had a retired fire chief or captian retire with his psycho wife on their street.  They were absolutely evil people and everyone on the street hated them.   My sincerest hope is that his pension takes a 50% or more haircut.  Evil **cking people.  

Believe me - these union people will be on a firing squad to kill you and your family if that will keep their pension going.

Wed, 05/13/2015 - 08:23 | 6088830 DerdyBulls
DerdyBulls's picture

Coming to a city near you. 

Wed, 05/13/2015 - 08:46 | 6088889 TheFourthStoog-ing
TheFourthStoog-ing's picture

Another anti-Semite exposed.

Wed, 05/13/2015 - 09:17 | 6088984 TruthInSunshine
TruthInSunshine's picture

Fuck you Abe Foxmann, Alan Dershowitz, Jack Abramoff, Bernie Madoff, Sam Israel, Jonathon Pollard, Scooter Libby, Richard Perle, Paul Wolfowitz, Eric Cantor, Jamie Di(a)Mon(d), Lloyd Blankfein(stein), et al.

Wed, 05/13/2015 - 11:06 | 6089390 Kirk2NCC1701
Kirk2NCC1701's picture

Antisemite?  He said nothing about Palestinians. 

Perhaps you confuse Jews with Zionist (who, as political group, are fair game).  Not all Jews are Zionists, and not all Zionists are Jews.  And many/most European 'Jews' have little or no Hebrew DNA in them.

Get clarity or stop "Bearing false witness against thy neighbor" with incorrect terminology, whichever is the case.

Wed, 05/13/2015 - 12:44 | 6089740 dexter_morgan
dexter_morgan's picture

Also known as the Ashkanazi

Wed, 05/13/2015 - 08:03 | 6088785 Fukushima Fricassee
Fukushima Fricassee's picture

Cold as hell, dirty lakes , third world corruption?

Wed, 05/13/2015 - 08:38 | 6088868 dead hobo
dead hobo's picture

Here's the plan.

1) Declare bankruptcy and clean the slate.

2) Start stealing again.(aka finance current expenses with long term debt. Be generous.)

3) Restore bloated pensions for favored politicians and their top supporters.

4) Start calling Chicago "The City That Works" again.

Wed, 05/13/2015 - 09:08 | 6088956 williambanzai7
williambanzai7's picture

Wed, 05/13/2015 - 09:50 | 6089105 doctor10
doctor10's picture

could be wrong I suppose-but the idea that any "pension" could be "Constitutional " or "Un-Constitutional" somehow defines a good part of the problem

Wed, 05/13/2015 - 11:26 | 6089481 matagorda
matagorda's picture

The Illinois constitution has a line that reads, "the pensions of state employees shall not be impaired."  If they expect retirees to share the burden, they need to pass an amendment to the state constitution.

Wed, 05/13/2015 - 11:12 | 6089439 Butterflying
Butterflying's picture

My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do... www.jobs-review.com

Wed, 05/13/2015 - 07:53 | 6088765 Fukushima Fricassee
Fukushima Fricassee's picture

I shit on these criminals and if you pay taxes there they shit on you.

Wed, 05/13/2015 - 09:18 | 6088990 williambanzai7
williambanzai7's picture

Wed, 05/13/2015 - 07:55 | 6088768 new game
new game's picture

greece 101, well versed and paper tyme big tyme...

Wed, 05/13/2015 - 08:02 | 6088784 VinceFostersGhost
VinceFostersGhost's picture

 

 

Good, after Greece is gone we'll have Chicago to talk about.

Wed, 05/13/2015 - 07:56 | 6088771 Yen Cross
Yen Cross's picture

  That what happens when you have a corrupt Obama administration stooge named Ram E. Manhole in charge of running the one of the most corrupt cities in Amerika.

Wed, 05/13/2015 - 08:01 | 6088782 Oldwood
Oldwood's picture

Definitely change you can believe in.

Wed, 05/13/2015 - 08:23 | 6088829 saints51
saints51's picture

Very true indeed. When you think about it, all major cities in the USA were built from crime or just evil. Illegal booze,cocaine,land theft for mineral rights or murder,porn,etc,etc.

Wed, 05/13/2015 - 08:39 | 6088860 FireBrander
FireBrander's picture

"Ram E. Manhole" DOES NOT RUN CHITCAGO!

Chitcago is run by CORPORATE AMERICA.

Yes, the political bend is to the left; but they can only "suggest" political moves...corporate America must give it's final approval.

Example..the Liberals wanted to "stick it" to Walmart over pay and benefits shortfalls...but their plan also stuck Sears and Target in the ass...both based in Illinois...the Liberals backed down...tell me again who runs Chitcago...or Illinoise for that matter?

You are not witnessing the failure of Liberalism (even though it's heavily involved)..the failure here is of Crony Capitalism...the people of Illinois have been fleeced...Private Profits and Social Losses...

The people getting these "pensions" do not put the money under the mattress...they spend it!...those billions all flow into corporate coffers...always follow the money...

Wed, 05/13/2015 - 09:03 | 6088941 Buckaroo Banzai
Buckaroo Banzai's picture

"Corporate America" doesn't give a fuck about Chicago. The gravy train starts and ends in the District of Columbia. Chicago is a rounding error.

Wed, 05/13/2015 - 09:25 | 6089023 markar
markar's picture

Target is based in Minneapolis, but we get your point

Wed, 05/13/2015 - 07:57 | 6088776 The Chief
The Chief's picture

No chance that these "retirees", IE, Parasites, will see their pensions. Hope they have a backup plan....

Wed, 05/13/2015 - 13:11 | 6089835 Monty Burns
Monty Burns's picture

The good thing is that they're all young enough to take up other employment.

Wed, 05/13/2015 - 07:57 | 6088777 B2u
B2u's picture

I used to live in Illinois, about 35 miles north of Chicago.  The handwriting was on the wall and three years ago I retired at age 54 and left Illinois.  Obama and the Dems can continue to destroy Illinois.  Good luck.   Oh, I now live in the tropics, so good luck living in the United States.

Wed, 05/13/2015 - 08:03 | 6088789 Oldwood
Oldwood's picture

I hate braggers!

But obviously becoming acclimated to a more native population helps with your transition to a tropical lifestyle.

Wed, 05/13/2015 - 09:20 | 6088998 TheMeatTrapper
TheMeatTrapper's picture

What is retirement?

Wed, 05/13/2015 - 10:07 | 6089176 Calmyourself
Calmyourself's picture

That is when you work for the .gov or its subsidiaries, teachers, etc.  You stop "working" they give you double or triple what you paid in by taxing the shit out of the still productive who eventually say screw this shit and move to a cash economy.  Then .gov bans the cash economy for your safety, terrorism etal, get it now?

Wed, 05/13/2015 - 09:52 | 6089119 Max Cynical
Max Cynical's picture

"The handwriting was on the wall and three years ago I retired at age 54 and left Illinois."

Hope you got a lump sum payout.

Wed, 05/13/2015 - 08:00 | 6088778 MarkAntony
MarkAntony's picture

The financial situation is the biggest, best kept secret in this city. It was not discussed at any real depth during a recent mayoral election or the secondary runoff, it is not discussed in the mass media, it is not talked about at any social events...  Eat, drink and be merry is the motto of the day in Chicago politics, every day, and while the Downtown area is bustling with tourists and locals shopping and devouring the local food fare, the south and west sides resemble Iraq or Syria with daily shooting to spice up our routines...

All it takes is just that particular, tiny little straw to fall on the cities back, and like the proverbial camel it will SNAP with a bang to be heard around the world...

Wed, 05/13/2015 - 10:25 | 6089260 F0ster
F0ster's picture

Either Chicago gives the Police Pension a haircut (and the cops retaliate)

Or

They sacrifice the other pensions and maintain the Police Pension plan at 100% on assurances the police enforce (violently) the resulting social uprising.

Either way, I foresee the LEOs in Chicago will end up like Nazi Brown Shirts in the not too distant future.

If Obama gets his way the LEO pension gets slaughtered if the GOP get their way everyone else except the LEOs get slaughtered. Vote away!

Wed, 05/13/2015 - 10:30 | 6089287 Colonel Walter ...
Colonel Walter E Kurtz's picture

A straw, like maybe the stock market not going steadily up, month after month, so that the mutual funds can report positive returns to those pension thereby enabling the can kicking to continue. 

It will continue until it cannot......and then....war, for the ultimate bankster solution/reset.

Wed, 05/13/2015 - 08:01 | 6088783 CHC
CHC's picture

Detroit and Chicago - I like the sound of that - seems so natural.

Wed, 05/13/2015 - 10:13 | 6089208 Freddie
Freddie's picture

I think as Detroit sunk - a lot of parasites...er I mean residents moved to Chicago.    A lot moved to Detroit suburbs but a lot went to Chicago.

Jus like the parasites who left New Orleans to go to Houston.

Or Callie scum going  to Colorado, Idaho and Washington.

Wed, 05/13/2015 - 08:03 | 6088787 Wait What
Wait What's picture

"This is what happens when you fight a stranger in the Alps, Larry! This is what happens, Larry! Do you see what happens, Larry?"

Wed, 05/13/2015 - 08:03 | 6088788 I woke up
I woke up's picture

Moodys needs to be investigated

Wed, 05/13/2015 - 08:44 | 6088883 Professor Fate
Professor Fate's picture

Too late to investigate Moodys and "What difference would it make".  Moodys deleted all the emails and the Chicago server was wiped clean.

Fate the Magnificent
"Push the Button, Max" 

Wed, 05/13/2015 - 08:06 | 6088795 Arius.
Arius.'s picture

yeah, but we can print as much as we want ... just raise the debt limit ,..

Wed, 05/13/2015 - 08:06 | 6088798 BoPeople
BoPeople's picture

Mission accomplished for Emanuel. I wonder how much of the missing money ended up in his pocket and was funneled to his brethren.

Wed, 05/13/2015 - 08:16 | 6088799 JustObserving
JustObserving's picture

Let's not forget US debt and unfunded liabilities of at least $1,400,000 per taxpayer and rising at $70,000 per taxpayer per year.

Kotlikoff has US debt and unfunded liabilities at over $2,000,000 per taxpayer:

 

Economist Laurence Kotlikoff: U.S. $222 Trillion in Debt

http://www.realclearpolicy.com/blog/2012/12/01/economist_laurence_kotlik...

Economist Kotlikoff: 'Our Country Is Broke'  

Wednesday, 11 Mar 2015 07:40 AM

 

"Our country is broke. It's not broke in 75 years or 50 years or 25 years or 10 years. It's broke today," he told the Senate Budget Committee. "Indeed, it may well be in worse fiscal shape than any developed country, including Greece."

 

http://www.newsmax.com/Finance/StreetTalk/Kotlikoff-GDP-debt-deficit/201...

Wed, 05/13/2015 - 08:43 | 6088881 FireBrander
FireBrander's picture

But unlike Greece, we can (for the time being) print the shit out of the worlds reserve currency to "recapitalize" our system.

You're can't go broke as long as you can lend money to yourself!

Wed, 05/13/2015 - 13:16 | 6089845 malek
malek's picture

Exactly.
I'm reading making up the [Illinois] deficit would cost around $22,000 per household

and think "only $22,000, and not even per individual but per household"? What an incredible deal!

Wed, 05/13/2015 - 08:07 | 6088800 TruthInSunshine
TruthInSunshine's picture

Da Bears!

(Panem et Circenses)

Wed, 05/13/2015 - 08:08 | 6088802 SofaPapa
SofaPapa's picture

...

"This action by Moody's is not only premature, but it is irresponsible to play politics with Chicago's financial future by pushing the city to increase taxes on residents without reform," said Emanuel in a statement, just hours after appearing on the South Side to bask in the formal announcement that President Barack Obama's presidential library would be built in Chicago.

 

Now that's great comedy right there!  Does anyone know if one of the Onion writers is MIA?

Wed, 05/13/2015 - 08:11 | 6088804 baddress
baddress's picture

Sounds like somebody in Chicago needs a few major insurance payouts.

Remember 6 months ago or so when that hacker Guccifer released those hacked emails about the Obama admin preppring for a nuke attack on Chi-town?

It was in his interview with the NYT and nobody even cared. http://www.nytimes.com/2014/11/11/world/europe/for-guccifer-hacking-was-...

Hold on to your hats. 

Wed, 05/13/2015 - 08:09 | 6088805 Dubaibanker
Dubaibanker's picture

Who would have thunk we would be comparing Argentina/Venezuela/Zimbabwe Vs Detroit/Chicago?

There is no difference between some of the largest cities of the US versus the worst parts of the world.

Wed, 05/13/2015 - 08:22 | 6088826 d edwards
d edwards's picture

and what do they all have in common? corrupt socialist govt.

Wed, 05/13/2015 - 08:35 | 6088855 Dubaibanker
Dubaibanker's picture

Yep. All 5 are defined by their corruption standards, socialist Govts, weak governance, rising crimes, decrepit infrastructure and eventual disintegration.

Wed, 05/13/2015 - 10:04 | 6089164 FreeMoney
FreeMoney's picture

The thing that separates american cities from banana republic countries is the ability to print.  they can only tax.  Watch Chicago / Illinois raise taxes and cut services.  next the the city / state will depopulate, and it will be another hollowed out liberal wreck like Detroit is.  The problem for states are that they can not declaire bankruptcy, they can only default.  when Illinois defaults ( and they will because they can not tax enough to pay the pension obligations ) it will be the retirees that riot.  the problem is the lack of forsight by the unions to hold onto defined benefit pensions tooth and nail while not demanding the programs be fully funded each and every year.  At least if they had gone defined contribution ( 401K )  they would have gotten 100% of their promised benefit.  Chicago is more like Greece than anything else. 

Wed, 05/13/2015 - 13:04 | 6089807 Monty Burns
Monty Burns's picture

"The thing that separates american cities from banana republic countries is the ability to print."

Bingo!  But for how long more?

Wed, 05/13/2015 - 08:36 | 6088859 Usurious
Usurious's picture

all by BANKSTER design..............kill the banks/monetary system and socialism dies with it......

Wed, 05/13/2015 - 08:09 | 6088806 Keyboard Kommando
Keyboard Kommando's picture

No sympathy for the union parasites and other pigs feeding in the public trough. The teachers union among other public unions needs to be busted once and for all!

Wed, 05/13/2015 - 08:09 | 6088807 wmbz
wmbz's picture

Chitcago should have an F rating for fucking pure junk! Moody's is way off base with their kind rating, as usual.

Wed, 05/13/2015 - 08:11 | 6088808 Troy Ounce
Wed, 05/13/2015 - 08:11 | 6088809 overmedicatedun...
overmedicatedundersexed's picture

warning DO NOT CONNECT DOTS..detroit chitown baltimore..can we see any dots, if so ignore..

one party rule for decades, not that gop has any better, all big gov corrupt elite..DC can be added to the list above if you look in right neighborhoods..decay rot filth hopeless under educated criminal class keep voting in your black crooks it's sure to improve things ..LOL

Wed, 05/13/2015 - 12:55 | 6089790 Monty Burns
Monty Burns's picture

I see that the dots are black....

Wed, 05/13/2015 - 08:11 | 6088810 fascismlover
fascismlover's picture

Any state with a massive city like Chicago is eventually going to find it has the rest of the state empty.  The rest of the states people who don't live in the big city are not going to pay for large city nonsense at which point, we all get to pay through federal.

Wed, 05/13/2015 - 08:32 | 6088845 post turtle saver
post turtle saver's picture

this is the best post in the thread so far and and *exact* description of what's happening in Illinois... the "downstate" tax base is *** toast *** in Illinois, there's nothing left for the parasitic mass near the lake to feed on anymore... so it just issues debt, issues debt, issues debt, makes promises to the Fucking Union Shithole(tm) voting base that it can't keep (especially the Public Union Shithole residents), issues debt, kicks the can...

now, the can just turned into a 55 gallon drum filled with roofing nails... going to be a hell of a lot harder to kick now...

Wed, 05/13/2015 - 08:21 | 6088821 Herdee
Herdee's picture

First Bush then Obama,both sold out the American people to useless wars.The Cities and their infrastructures are run down.Look at the demographic problems of society and how ordinary people are treated.It's a disgrace how China is able to build brand new everything and yet America is allowed to decay.It's a structural problem not cyclical.

Wed, 05/13/2015 - 09:00 | 6088936 j0nx
j0nx's picture

It's a parasitic relationship between Wall Street/K Street and DC politicians problem yet everyone seems to always want to blame the unions and average municipality workers instead. I'm all for cracking down on pensions and unions right the fuck after Wall Street and K Street get their wings clipped and politicians and bankers start going to jail. Until then forgeeeet about it.

Wed, 05/13/2015 - 08:23 | 6088827 Monetas
Monetas's picture

"See, Capitalism doesn't work .... we even tried fixing it's flaws .... with a little socialist .... fine tuning .... and it only got worse !"   Billy Boy Ayers

Wed, 05/13/2015 - 08:23 | 6088831 The man with po...
The man with pointy horns's picture

Illinois Nazis, pfft...

I hate Illinois Nazis.

Wed, 05/13/2015 - 09:05 | 6088946 j0nx
j0nx's picture

And the silly historians would have people believe that the Nazis were a right wing movement. What a crock of shit that is. Nazis were total left wing socialists built completely by people who were artists and university professors and the like before they created the party on promises to the people to restore greatness and retake what they felt was unjustly taken from them in WW1. What do artists and professors here in America have in common? Left wing moonbats is what they have in common and that shit hasn't changed in 100 years.

Wed, 05/13/2015 - 08:25 | 6088835 agstacks
agstacks's picture

Obviously, their taxes are too low.. 

 

\s

Wed, 05/13/2015 - 08:25 | 6088836 HandyCrapper
HandyCrapper's picture

I live in Philadelphia...we are next on the bankruptcy shitshow tour.

Wed, 05/13/2015 - 08:27 | 6088839 Rikky
Rikky's picture

there is zero logic in not switching all plans to a 401k style arrangement and stop this growing beast.  sure it's still impossible to deal with the current deficits but at least you stop growing future ones.  logic has nothing to do with it of course as this is all about politics and sucking the teat of the taxpayers until you either end up like detroit driving out the productive folks who are tired of paying for politicians/union self service co-dependence.

Wed, 05/13/2015 - 08:30 | 6088841 Monetas
Monetas's picture

Even the Austrians .... couldn't fix this mess .... if we paid them .... now, they have their own "N" word problem .... with Muslim invasion .... and are not available !

Wed, 05/13/2015 - 08:33 | 6088849 youngman
youngman's picture

They have a good baseball team...so sad.....the unions killed this city....and the corruption of the politicians...see the unions above

Wed, 05/13/2015 - 09:59 | 6089150 DutchBoy2015
DutchBoy2015's picture

Yeah, I love the way the Cubs dominated the world series for past 100 years.

Wed, 05/13/2015 - 11:01 | 6089400 Freddie
Freddie's picture

Blame Steve Bartman. Bartman = sounds like a dual shitizen to me.

https://www.youtube.com/watch?v=JoumAUfwnI8

https://www.youtube.com/watch?v=A-Wy_ZSkPsE

Wed, 05/13/2015 - 08:35 | 6088853 holdbuysell
holdbuysell's picture

“The problem with socialism is that you eventually run out of other people's money.”

- Margaret Thatcher

 

Wed, 05/13/2015 - 08:35 | 6088857 cn13
cn13's picture

The Chicago model of city workers putting in 25 years and then retiring for life with annual payments equal to 80% of their salary with full medical benefits is over.

These people unfortunately are going to find they have been made promises by politicians that cannot be kept.

Wed, 05/13/2015 - 12:49 | 6089763 Monty Burns
Monty Burns's picture

The State Supreme Court has just ruled in the retirees' favor.  So interesting to see what happens now.  The Detroit Death Spiral I guess.

Wed, 05/13/2015 - 08:37 | 6088866 Tinky
Tinky's picture

I grew up in Evanston, and enjoyed Chicago for many years during that very different era. Such a shame to see what's happened in a relatively short span of time, and an obvious microcosm of the U.S.

Wed, 05/13/2015 - 08:39 | 6088869 buzzsaw99
buzzsaw99's picture

Shit Cah GO!

Wed, 05/13/2015 - 08:39 | 6088872 Last of the Mid...
Last of the Middle Class's picture

I watched the mayor of Baltimore on live TV talk about equality while 260 million american quietly made a mental note to avoid that city at all costs. And they can't figure out why these cities implode after years of liberal agenda.  Duh.

Wed, 05/13/2015 - 10:28 | 6089279 Freddie
Freddie's picture

Until white idiot fan boys stop going to see the Ravens, Orioles, NBA thug team then it is a joke.  Until people wake up and boycott all of TV and Hollywood then whites are a joke.

I see Tyler has US Army ads aka A Force For Good (fascism & tyranny) ads running

Wed, 05/13/2015 - 08:48 | 6088901 IndianaJohn
IndianaJohn's picture

As a wage earning man, I lived in gritty Chicago 1962-98. I saw Chicago go from a world-class manufacturing city to a third world slum, from 1980 and on. Chicago does have a fine lakefront though.

Up to 1980 the better paying jobs were skilled trades in the private sector. That reversed in about 1980 or earlier and the city clerk is now better paid than a mechanic or a machinist.

The budget can be corrected by cutting all public sector wages and pensions in half. with a much lower cap on management. Though none of those tax paid mooches are even worth that pay scale. 

Wed, 05/13/2015 - 09:06 | 6088950 DutchBoy2015
DutchBoy2015's picture

My favourite parts of Chicago.  Outer Drive. Navy Pier. Museum of Science and Industry.  The rest is crap.  Oh forgot the Aquarium and Field Musuem ., World Class.

Wed, 05/13/2015 - 10:38 | 6089316 Freddie
Freddie's picture

My favorite part is the plane lifting off the ground and leaving that shithole. 

I went there once.  It appears it used to have a lot of german and north european toll and die guys.  Now it is just a hell hole filled with parasites.

I went to the suburbs on ione trip.  The airport is even crap compared to detroit's airport.  The only nice thing was a woman from Spain in another line flying back to Spain on Iberia Airlines.

Wed, 05/13/2015 - 09:16 | 6088978 Tsar Pointless
Tsar Pointless's picture

"From 1980 and on" you say? Hmm. What happened at the turn of the 80s to cause such plight in our urban areas?

Bonzo, any guesses before bedtime? (Note: I am not calling you Bonzo. It's a hint for the answer to my question.)

Wed, 05/13/2015 - 08:54 | 6088913 Niall Of The Ni...
Niall Of The Nine Hostages's picture

So the Illinois supreme court has told Rahm Emanuel that giving the finger to Chicago's pensioned parasites isn't an option and to pay up as promised.

A braver man would have replied: "With all due respect, your honors, with what exactly?"

Wed, 05/13/2015 - 08:56 | 6088922 SmedleyButlersGhost
SmedleyButlersGhost's picture

"Chicago ain't ready for reform yet". 1st Ward Alderman Paddy Bauler

"Chicago ain't no sissy town". 1st Ward's Bathhouse John Coughlin

 

Nothing has changed much

Wed, 05/13/2015 - 08:56 | 6088923 Toolshed
Toolshed's picture

At least Detroit didn't get saddled with a library devoted to the worst president the US has ever suffered under.

Wed, 05/13/2015 - 09:02 | 6088940 venturen
venturen's picture

Obama and Chicago....a match made in hell

Wed, 05/13/2015 - 09:13 | 6088967 SmedleyButlersGhost
SmedleyButlersGhost's picture

Obama is a spawn of Chicago. For unbridled corruption - you can't beat Chi or Illinois. Two successive Governors serving jail time. Not enough people know that Obama only got his Senate seat after the Chi machine 'got' Obama's opponent - who was a shoo in for that Senate seat- by leaking the sealed record of his divorce which had some naughty bits.  The leak was never traced but was in the Chicago Court records.  Look it up - Ryan was the opponent's name. His ex- wife even said it was BS. she is worth looking up btw - great looking TV star.

Wed, 05/13/2015 - 09:31 | 6089051 Tsar Pointless
Tsar Pointless's picture

Before anybody sings a sad song for Jack Ryan, just remember he was an investment banker for the bank that performs God's work on a daily basis, and who wanted millions for himself but nothing for anybody else.

Wed, 05/13/2015 - 09:04 | 6088947 yogibear
yogibear's picture

Chicago has the strongest public union stance in the US.

The public unions own the state government in Springfield. 

They will just keep raising taxes until anyone that can pay leaves. 

Even public pension retirees are leaving Illinois due to the cost of living and ever-higher taxes.

Wed, 05/13/2015 - 09:11 | 6088964 Fix It Again Timmy
Fix It Again Timmy's picture

If you believe in the guarantee of pensions, you probably still believe in the tooth fairy....sorry folks, that's just the way it is....

Wed, 05/13/2015 - 09:13 | 6088971 yogibear
yogibear's picture

Obama brought Chicago politics and spending to DC and the rest country.

Wonder why the deficit and debt in general has ballooned?

The rest of the country has turned into a larger Chicago. 

Wed, 05/13/2015 - 09:15 | 6088976 Mike Honcho
Mike Honcho's picture

Let reelect a former employee of a failed administration that has a degree in Ballet.  The Daley family has and still runs that city for decades, Capone would be envious.

Wed, 05/13/2015 - 09:18 | 6088988 Tsar Pointless
Tsar Pointless's picture

At some point in the 1900s, the mob realized buying and holding onto government was expensive. It would be much cheaper to get elected and run government yourself.

Hence, you are correct. Capone would be envious. Today, he'd be elected mayor, not worrying about buying one.

Wed, 05/13/2015 - 11:05 | 6089408 22winmag
22winmag's picture

And what started out as American mob is now mostly globalized foreign mob.

 

That completes the circle. The snake has been eating it's own tail and has run out of tail.

 

Political mobsters are no longer even real Americans.

Wed, 05/13/2015 - 12:18 | 6089645 Monty Burns
Monty Burns's picture

Same with what's known as the "Russian" Mafia. They're almost all Jews who fled Russia after looting it.

Wed, 05/13/2015 - 09:15 | 6088977 DutchBoy2015
DutchBoy2015's picture

Just remember Ram E. Manhole is an Israeli firster dual citizen.  The Jewish Mafia has always had the power in Chicago. (and other cities)

Wed, 05/13/2015 - 09:21 | 6089001 DutchBoy2015
DutchBoy2015's picture

The Joooish Mafia put the Mulatto Monkey in power.   Israel got really pissed off when Obomber started criticizing Israel about their genoicide and theft in Palestine.   I think they warned him about what they did to JFK if he didn't play ball.

Wed, 05/13/2015 - 12:17 | 6089642 Monty Burns
Monty Burns's picture

Workers' friend Jenny Pritzker was the one who created Obama and raised nearly %1 billion in funding.

Wed, 05/13/2015 - 09:22 | 6089004 Salzburg1756
Salzburg1756's picture

On state street that great street I just want to say
They do things that they don't do on Broadway

Pretty soon you'll see it on Broadway too.

Wed, 05/13/2015 - 09:28 | 6089035 DutchBoy2015
DutchBoy2015's picture

Last time I was in Chicago in 2000,  I couldn't walk anywhere on Michigan Ave, State st. or Navy Pier without those obnoxious  'Jews for Jesus'' getting in my face and handing out pamphlets.  My Brit wife at the time had enough and finally yelled at them  ''Just piss off''.

She don't take shit from assholes.  LOL

Wed, 05/13/2015 - 12:59 | 6089073 Bastiat
Bastiat's picture

Notice how the downgrade triggered acceleration of certain debt related obligations to the tune of $2.2 bln?  Floating rate debt and interest rate swaps have his kind of crap embedded.  Jim Grant called this crap out in the mid90s when Wall St. started pimping it in earnest.  A way of easing current budget stress by taking on hidden future risk.

------------------------

This is how the municipal financial domino gets the cascade started:  unfunded pension liabilities doubling as expected market returns diminish, then downgrades triggering accelerations of provisions in interest rates swaps and letters of credit backing floating rate debt.  Still wonder why the CBs are pumping the equities?  They've reduced fixed income returns to near zero; what's left? What do those liabilities look like when you assume 3% returns and they are discounted to present value at that rate?

------------------------

Then we have the Pension Obligation Bonds.  This is when you issue bonds, take the proceeds and invest them to decrease your pension liability.  Under the bullshit, it is a pure arbitrage - the only way to win is to beat the vig or earn more on the investment portfolio then the interest rate on the bonds.  If you borrowed at 7% (because these bonds can't be issued tax exempt), how's that looking when the equity markets even stall, let alone correct and your fixed income is giving you nothing?  Fucking ooops, eh?  How about real estate taxes when property markets some day have real, non-bubble price discovery?  Sales tax revenues? 

 

 

Wed, 05/13/2015 - 09:45 | 6089091 City_Of_Champyinz
City_Of_Champyinz's picture

hahaha all brought to the citizens of that corrupt cesspool of a city by decade after decade of one party rule & liberal progressive 'policies'. 

Liberalism always generates the opposite outcome from its stated intent.  It never fails.

Wed, 05/13/2015 - 09:51 | 6089115 SystemOfaDrown
SystemOfaDrown's picture

For the life of me couldn't understand Chicagoans re-elected Mayor Rahm Emanuel but so very happy Rammy's municipal level austerity policies are blowing up in his face.

Wed, 05/13/2015 - 09:53 | 6089121 DutchBoy2015
DutchBoy2015's picture

Chicago elections have always beeen rigged.  Chicago is controlled by the Joooish Mob, always has been.  

Wed, 05/13/2015 - 09:57 | 6089139 JoeTurner
JoeTurner's picture

Shit will get real when retired teachers, fireman and cops in Chicago are the ones rioting when they realize their gold-plated pensions have evaporated...

Wed, 05/13/2015 - 10:01 | 6089156 DutchBoy2015
DutchBoy2015's picture

Rahm is calling his Mossad buddies and asking if they can take care of the Sears Tower and Hancock builiding.

Wed, 05/13/2015 - 11:11 | 6089394 22winmag
22winmag's picture

Caterpillar could use some new bulldozer sales.

 

http://www.fool.com/investing/general/2015/04/01/3-reasons-caterpillar-i...

Wed, 05/13/2015 - 10:08 | 6089180 Atomizer
Atomizer's picture

Collective mindsets will blame it on the weather. 

Wed, 05/13/2015 - 10:20 | 6089245 Keynesians say ...
Keynesians say the darndest things's picture

Emanuel 2016 soon comrades

I'm sure O-man will find a way to bail out Shitcago at the expense of taxpayers around the country

Wed, 05/13/2015 - 12:11 | 6089623 Monty Burns
Monty Burns's picture

Get Yellen to print and then pass the money on to Chicongo.  Have no doubt but that's what's going to happen.

Wed, 05/13/2015 - 10:26 | 6089272 gcjohns1971
gcjohns1971's picture

Annnndddd Another One Bites the Dust!!!

New Detroit in the making.

After seeing several (hundred) iterations of the results of these policies you'd think people would get a clue.

Proof there's no intelligent life here.

Wed, 05/13/2015 - 10:59 | 6089384 22winmag
22winmag's picture

I'm sure taxpayer-funded presecription steroids for cops added to the deficit. Not so much in terms of money spent, but millions of $ in civil lawsuits for cops wilding on alleged suspects (at least the suspects that don't end up disappeared in that secret detention building).

Wed, 05/13/2015 - 10:57 | 6089387 NoTTD
NoTTD's picture

Can't help but notice that all cities on the list have had single party rule for decades. And all The same party.

Wed, 05/13/2015 - 12:05 | 6089611 Monty Burns
Monty Burns's picture

It must be great to be on a high level court where you can hand down judgements with no allowance for the practical impact.

Wed, 05/13/2015 - 12:47 | 6089752 dexter_morgan
dexter_morgan's picture

.

Wed, 05/13/2015 - 12:48 | 6089753 dexter_morgan
dexter_morgan's picture

Isn't a supreme courts only job supposed to be to determine the consitutionality of laws passed by lawmakers? It isn't their fault the fucking legislators sent them a pile of shit.

Courts making law is a major problem in this country.

 

Wed, 05/13/2015 - 12:45 | 6089746 dexter_morgan
dexter_morgan's picture

Nice ratio of retirees to active workers there. I guess that happens when in many cases you can retire with full benefits at 50 or 55 like my brother-in-law.

Wed, 05/13/2015 - 13:01 | 6089810 Dixie Flatline
Dixie Flatline's picture

Couldn't happen to a bigger bunch of jerks.  Chicago is a fracing cancer on the midwest.

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