Only Wall Street Wins in Detroit Crisis Reaping $474 Million Fee

[limpyhobbler]

The only winners in the financial crisis that brought Detroit (9845MF) to the brink of state takeover are Wall Street bankers who reaped more than $474 million from a city too poor to keep street lights working.

The city started borrowing to plug budget holes in 2005 under former Mayor Kwame Kilpatrick, who was convicted this week on corruption charges. That year, it issued $1.4 billion in securities to fund pension payments. Last year, it added $129.5 million in debt, 9.3 percent of its general-fund budget, in part to repay loans taken to service other bonds.

Detroit, which is trying to avoid becoming the largest U.S. municipal bankruptcy, struggles to serve residents after revenue declined when the auto industry collapsed and the city began to empty. Michigan (BEESMI)’s Republican governor, Rick Snyder, is preparing to name an emergency manager, who will have to address debt and derivatives taken on in the last eight years.

“We have no lights, no buses, poor streets and now we’re paying millions of dollars a year on our debt,” said David Sole, a retired municipal worker and advocate for Moratorium Now Coalition, a Detroit group that fights foreclosures and evictions. “The banks said they need to be paid first. But there is no money.”
...

from http://www.bloomberg.com/news/2013-03-14/only-wall-street-wins-in-detroit-crisis-reaping-474-million-fee.html

[Fire Walk With Me]

1. Debt and "austerity" work great! Europe is now open to 1% take-over and they're

pushing the same schemes upon America! Wur nummur wun!

Using disaster to create the government of your choice

http://www.democraticunderground.com/12526490

[99th_Monkey]

2. Heads I win, tails you lose.

Di$a$ter Capitali$m work$ like a charm,
... but ONLY for the disaster capitalist assholes.

[dtom67]

3. The " derivitives" are usually the culprit...

Municipal officials use some byzantine derivative bet ,that they do not really understand, to fund pensions. The Bet crashes and they city owes a shitload of money to wall street.
This allows the city to go bankrupt and void its Union contracts. It has finally been understood that the key to breaking unions is to bankrupt those they work for.

...Which is preferable; seeing the train coming and not being able to get off the tracks? Or being blissfully ignorant, right up til the end?

Sometimes I hate Thinking.......

[Fire Walk With Me]

4. "The key to breaking unions is to bankrupt those they work for."

Damn, that's good. Any vector and vulnerability they can, huh?

[dtom67]

6. absolutely...

this was what Romney was talking about when he said " let Detroit go bankrupt"; let the Big Three file bankruptcy and shred their union contracts.
That was the motive behind the congressional order that the Post office fund their retirement plan for 75 years; create an artificial financial crisis and blame the over-paid union thugs.
and of course , the idea of " Emergency Managers " here in Michigan. The first thing an emergency manager will do is rip up union contracts.
And then he will collect a six figure salary.

They don't even have to hide it anymore; the media will do it for them.....

[Fire Walk With Me]

5. This was just posted in GD in a thread. Although Ed is too naive to imagine that this is a

long game by banksters to do among other things exactly what you've described (privatisation is also rampant as is seizure of government power), it describes it perfectly.

http://tv.msnbc.com/2013/03/11/michigans-emergency-manager-law-another-front-in-the-war-for-union-survival/

[Fire Walk With Me]

7. Breaking: LIBOR Rigging & Complex Derivatives By UBS Contributed To Detroit’s Demise

http://www.mfi-miami.com/2013/03/libor-rigging-complex-derivitives-by-ubs-contributed-to-detroits-demise/

As the downtrodden African-Americans and whites who make up what’s left of the City of Detroit’s 700,000 resident are about to have their fundamental human rights taken away by the state of Michigan in the coming weeks, new information is coming out as to who and what is responsible for the Detroit’s financial problems.

As anyone with a brain can tell you, for nearly 40 years, Detroit residents have been getting the shaft in Detroit’s slide from thriving metropolis into a dystopian wasteland that once only existed in the imagination of some Hollywood Science Fiction screenwriter. As the body count of victims is being assessed by finance experts and Michigan Governor Rick Snyder’s office, it is becoming clear there were actually some major winners in Detroit’s demise and no, former Mayor Kwame Kilpatrick hasn’t been mentioned yet. Even if he is, it appears there were bigger winners than members of the Kilpatrick family.

It appears that UBS, Bank of America and JPMorgan Chase enabled about $3.7 Billion of bond issues to cover deficits, pension shortfalls since 2005 and with interest these liabilities rose to $15 billion including money owed to retires and the city employees pension fund.

These bond sales cost Detroit $474 million for underwriting expenses, bond insurance and the handling of interest rate swaps. This total cost is equal to the Detroit’s budget for police and fire protection for that same period.

(More at the link. Thank you for thinking, no matter how much it hurts and isolates.)