Detroit officially bankrupt

[Fake Boris]

And is Quebec bankrupt?

No.

[Fake Boris]

And is Quebec bankrupt?

No.

[Ben Kenobi]

And is Quebec bankrupt?

Quebec's system is funded by Alberta. So yes, they are bankrupt. Thank goodness for federal transfer payments so that they can steal from the rest of Canada.

[Dinner]

The question is whether the court hearing the inevitable appeal will invoke an injunction against bankruptcy protection. Hopefully not.

No, the better question is wither they will actually get the investors to take an equal amount of losses or if they're going to primarily just dump on the retirees while leaving the bond holders relatively untouched. I personally hope the bond holders take a bigger hit.

[Imran Siddiqui]

Public employees might argue that they pay into their pension plans. But they're not forced to pay into SS so at least they're paying into something that they can reasonably be assured that they're going to get back. And SS payout don't even come near what these pensions are going to pay out and aren't reduced by outside income. .

I pay into Social Security. And all federal employees who started after 1985 have.

[rah]

I stand corrected. Is it the same for state employees?

[Imran Siddiqui]

I stand corrected. Is it the same for state employees?

I can't speak to states, but the Feds match TSP (our 401k) deductions up to 5%.

[rah]

I keep hearing about Illinois teachers not paying SS so I wasn't sure. A quick google didn't answer my question.

It does seem humorous that the feds match the payment to themselves then use it for something else.

[Ben Kenobi]

I personally hope the bond holders take a bigger hit.

Yes, because screwing over muni bondholders in Detroit isn't going to have a negative effect on California's bond issues.

I actually hope they do the same thing, because it massively increases the inherent risks attached to muni bonds. And what happens when risk increases? So do interest rates.

[Dinner]

It was perfectly clear even 20-30 years ago that Detroit was in trouble and that it was only going to get worse. Those bond holders already got an interest rate premium to compensate them for that risk and what is more most of them really were large hedge funds looking for a higher rate of return by buying riskier investments so I have no problems letting speculators take it on the nose. I do have a problem with taking away a person's pension after he spent a life time earning it so if the retirees have to take a hit then the bondholders should have to take at least as big a hit if not larger.

[Ben Kenobi]

It was perfectly clear even 20-30 years ago that Detroit was in trouble and that it was only going to get worse.

The same is true of most of California, btw.

Those bond holders already got an interest rate premium to compensate them for that risk and what is more most of them really were large hedge funds looking for a higher rate of return by buying riskier investments so I have no problems letting speculators take it on the nose.

Again - the reason they invested in Muni bonds is because they were told that the government would never default and these were seen as 'risk free investments'. This is how many cities have gotten themselves into trouble with all the bond issues and borrowing.

Now, that it's been established that cities can in fact declare bankruptcy, screwing over the bondholders is going to increase interest rates on the next cities on the line. And where are those cities, Oerdin? What happens when their payments which are already too high increase?

I do have a problem with taking away a person's pension after he spent a life time earning it

Where's the money going to come from Oerdin? Detroit is broke.

so if the retirees have to take a hit then the bondholders should have to take at least as big a hit if not larger.

Again, actions have consequences. Screwing over the bondholders is going to **** up California muni bonds.

[Dinner]

Ben, your reading disability is showing again.

We're talking about which obligations should get written off in bankruptcy. Just about all of them will take a hit so that the obligations end up matching the city's ability to pay. That's how municiple bankruptcies work. I'm saying make the speculators should take a much bigger hair cut than retirees. It's a question of who should take the loses, everyone will take some lose but I would like to see speculators take a much larger lose as 75 year old retirees really can't just go out and get a new job.

[Ben Kenobi]

We're talking about which obligations should get written off in bankruptcy.

Screwing over secured creditors (ie, muni bond holders), is going to have negative repercussions for every muni bond. These repercussions are going to be concentrated in bonds for cities that are close to the brink of bankruptcy.

I'm saying make the speculators should take a much bigger hair cut than retirees.

Many of these 'speculators' are also invested in California Muni bonds. If they are going to lose their investment, then they are going to sell their Cali bonds if they believe that these cities are going to go under. Many of these speculators are also government investers and pension fund holders. So in a sense you're supporting screwing over some retirees over other ones.

Cities that are on the right side of the line are going to see an influx of cash and their interest rates will probably decrease.

75 year old retirees really can't just go out and get a new job.

Plenty of pension funds have muni bonds, Oerdin. Screwing over the other muni bonds is going to have a cascade effect. Detroit would actually be better off cancelling their ongoing pension fund burdens and using the savings to keep bondholders afloat.

[Dinner]

http://www.huffingtonpost.com/2013/08/04/detroit-bonds_n_3704098.html

Detroit is already asking the court to consider even the general obligation bonds, long considered the safest class of municipal debt, to be considered unsecured debt holders. It will be interesting to see what the court says but I hope they agree.

[Ben Kenobi]

It will be interesting to see what the court says but I hope they agree.

So do I. It will destroy California.