Chicago Faces $2.2 Billion Bank Payout After Rating Cut to Junk

[Purveyor]

Source: Bloomberg

Chicago may have to pay banks as much as $2.2 billion after Moody’s Investors Service dropped its credit rating to junk, deepening the fiscal crisis in the third-largest U.S. city.

The company’s decision Tuesday to cut Chicago’s $8.1 billion of general obligations two ranks to Ba1, one step below investment grade, allows banks to demand that the city repay debt early and exposes it to fees to end swaps contracts, Moody’s said in a statement. Mayor Rahm Emanuel plans to refinance $900 million of debt to reduce the penalties.

The downgrade adds to the financial pressure on Chicago, which was already the lowest-rated of any big U.S. city except Detroit. It follows an Illinois Supreme Court ruling last week that safeguards retirement benefits, casting doubt on Chicago’s ability to curb its $20 billion pension-fund shortfall.

“It certainly becomes a wakeup call for action for the political leaders, and also other parties, to come to the table and find a solution,” said Dan Heckman, senior fixed-income strategist at U.S. Bank Wealth Management, which oversees about $128 billion in Kansas City, Missouri.

Read more: http://www.bloomberg.com/news/articles/2015-05-13/chicago-faces-2-2-billion-bank-payout-after-rating-cut-to-junk

[Spitfire of ATJ]

1. Raise taxes on the rich....

It worked in California.

[hack89]

6. Yes and no

it increased revenues but dramatically increased revenue volatility. In California, 150,000 tax payers (out of 15 million) generated more than half the revenue. Upside down pyramids are unstable - depending on so few tax payers resulted in big fluctuations in tax revenue. Tax volatility was the cause of big state deficits during the recession as even top income earners took a hit.

The only way it works over the long term is to bank a significant portion of the tax revenue to even out the valleys when revenue falls. It takes a lot of discipline on the part of government to do that - their instinct is to spend it all.

[Spitfire of ATJ]

7. "their instinct is to spend it all."

No, their instinct is to be a hero and claim the tax payers are getting a refund, then to give it all to the rich.

This is followed by some IDIOT who works at Micky Ds claiming he got a tax cut when he didn't 'cause he heard it on local RW Talk Radio.

The chocolate ration has been increased.

[hack89]

8. In any case, soaking the rich has potential pitfalls

that have to be recognized and planned for. California learned those lessons the hard way. I have no problem with raising taxes on the wealthy but lets be smart about it.

[Spitfire of ATJ]

9. Ya think we need to sneak up on em?

[hack89]

10. No. Just elect smarter politicians. nt

[Spitfire of ATJ]

11. No, just ones who know who they work for.

[hack89]

12. Same thing. Nt

[jtuck004]

2. Part of an ongoing financial theft by our bank$ter/donors. Be sure and remember the

part these big bank$ter/donors played in destroying this country, won't you?

And ask yourself why we let them?

[salib]

3. Imagine if this announcement occurred before the election?

Now, the Governor is one step closer to being able to come in a take control. Make boo coo bucks for his friends and handlers.

[SoapBox]

4. Life in Rahm's World!

Oh and the World of Banksters too.

[Demeter]

5. RahmBo Wins Another

[BrotherIvan]

13. But he's doing a great job!

[quadrature]

14. simple solution... rewilding (same as Detroit) ...nt