City of Detroit Files for Bankruptcy

[Stag Country]

This USA was settled on killing animals to wear and smoking cigarettes by a bunch of hooligans that couldn't find jobs in Europe. Leave the Pilgrim and religious freedom BS where it belongs. In a classroom of 8 year olds who don't know enough to question it.

Yes, but the analogy you use is backwards here. Jobless people came to a land where there was opportunity aplenty when the pilgrims settled in America. The cited article from earlier insinuates that we just fill Detroit's vacancies with immigrants (among other things). I don't think it's leaping to any outrageous conclusions to suggest that jobs are a little hard to come by in Detroit at the moment.

[Stag Country]

If Detroit bankruptcy happened, and pensioners lost their pensions, could they draw social security?

It's entirely dependent on whether they previously paid into the program. In States like Ohio, all public employees are excluded from social security, Michigan is a bit different, but it's a safe bet to assume that many were not enrolled in the program.

[Guest Raidne]

Flow - Swaps were interest rate bets, secured by casino revenues. Under Chap. 9, these would maybe be exempt from the stay. Under the deal, they're no longer secured, but the creditors took on other super-priority status.

[Former Lord of Winterfell]

Flow - Swaps were interest rate bets, secured by casino revenues. Under Chap. 9, these would maybe be exempt from the stay. Under the deal, they're no longer secured, but the creditors took on other super-priority status.

So where is the horrible Republicans sleaze? Part of what Orr did was negotiate that the swaps would get only 75% of value. That actually sounds like a pretty good deal to the city for loans secured by specific cash collateral that was sitting in accounts.

[Guest Raidne]

I see you looked this up yourself, only they got it wrong about the priority - the banks still have priority, but now have no special revenue exemption from the stay, so your overall point still stands.

But the amounts Detroit has paid on these swap deals are much, much higher. The city's utility boards fired 4 out of every 5 employees to pay $500 million under Bing, and who knows what else, I haven't had time to look.

Michigan urban Democrats are AT LEAST as corrupt ad State Republicans, so don't worry about me trying to pull any partisan bullshit on their account.

And maybe you're right about Orr - I'm partly relying on inside info from people I know who have long-standing affiliations with the state Democratic party, but I think there's likely even more to this story. Sadly I'm not likely to have time to dig further. For anyone who does, I think the path to investigate concerns ties between the Governor's office and Bank of America and city of Detroit officials and the European banks.

[Guest Raidne]

I don't doubt that you always speak what you believe to be the truth. I do doubt that you're always right, or always as well informed as you think.

To me, this means I'm credible, but may not be competent. No argument there.

[Tempra]

Live blog of bankruptcy hearing: http://m.freep.com/localnews/article?a=2013130723016&f=1232

City wants all present or future lawsuits stayed, including ones against the State that would hinder the city's bankruptcy.

ETA: the court summarily accepted jurisdiction over the case as a core proceeding per 28 USC 157(b ).

[Guest Raidne]

ETA: the court summarily accepted jurisdiction over the case as a core proceeding per 28 USC 157(b ).

I don't think that was really in question after the Michigan Court of Appeals overturned the Ingham County Circuit Court's order yesterday.

ETA: Though, as far as I can tell, the Court seems to disagree and is hearing arguments on state vs. federal jurisdiction at this very moment, and said the issue was still to be decided. Not sure how that relates to "core proceeding" jurisidiction, the issue of jurisdiction seems to remain an open question.

I personally think that there are really two issues at stake. One is whether the state law allowing a state-appointed municipal emergency manager to file for Chapter 9 bankruptcy on behalf of the municipality is in violation of the State Constitutional provision preventing any impairment of public pension benefits when the restructuring plan the city filed directly impairs those benefits.

To the extent this question rests on the power of the bankruptcy Judge to modify - instead of simply approve or reject - the restructuring plan in a Chapter 9 bankruptcy, it is, IMO, a federal question on federal bankruptcy law.

To the extent that this question rests on whether it is constitutionally permissible for any action of the emergency manager to potentially result in an impairment of pension benefits, it is a state question.

To the extent this question rests on whether the powers granted to the city the emergency manager are excessive - and they are the most extensive, by far, under any state law in the country - as a general matter, I think it could properly decided by the state or federal court.

The other issue is the jurisdiction of the bankruptcy court, which rests on the outcome of the previous question. That is a question for the federal bankruptcy court to decide.

[Tempra]

I don't think that was really in question after the Michigan Court of Appeals overturned the Ingham County Circuit Court's order yesterday.

ETA: Though, as far as I can tell, the Court seems to disagree and is hearing arguments on state vs. federal jurisdiction at this very moment, and said the issue was still to be decided. Not sure how that relates to "core proceeding" jurisidiction, the issue of jurisdiction seems to remain an open question.

As the judge noted, federal bankruptcy judges have ruled on the issue of eligibility of a municipality to file chapter 9. It is a core proceeding under 157(b )(2)(A) because it relates to the administration of the estate.

[Guest Raidne]

And does anyone know of a live blog of this who provides better coverage than:

Lots of legal talk. but the theme of the day: This is a state issue. Federal court should honor that.

Thanks Tresa. Please, keep commenting on how surprising it is when one of the lawyers representing any of the parties is a woman, too.

[Guest Raidne]

As the judge noted, federal bankruptcy judges have ruled on the issue of eligibility of a municipality to file chapter 9. It is a core proceeding under 157(b )(2)(A) because it relates to the administration of the estate.

Yes, he said that right before he distinguished state/federal jurisdictional issues - the issue in this case - as a separate question.

ETA: Rather, at the same time:

Judge notes that a few Chapter 9 municipal bankruptcy filings have been dismissed, but mostly because a federal judge determined the eligibility of the filing, not necessarily because of issues of federal vs. state jurisdiction.

As far as I can tell from this god-afwul live blogging. Are you reading about this somewhere else as well?

[Guest Raidne]

And I'm also not sure I'm really addressing the same issue as you are, because I'm not quite sure what you are saying? Yes, a municipality is eligible to file Chapter 11.

But, does Orr, as the city manager, lawfully represent the municipality? Can he file on its behalf? And what court should decide that question??? There is law on the first question, but only as it pertains to unincorporated local entities, in which case the issue is decided by whether the filing party has the power to levy taxes. Further, there is an issue with regard to whether Detroit, while under state emergency management status is a municipality or some other kind of entity, perhaps even part of the state.

But it's the last issue the judge is focusing on.

ETA: One more addition - I think some background on the controversy surrounding Michigan's emergency manager law is probably needed to get a full grasp of the issues. The state House's Democratic Judiciary Committee staff determined the law was unconstitutional. Here is a post from Representative John Conyers:

At the forum, the Nation’s leading expert on constitutional and bankruptcy issues, Professor Kenneth Klee, stated unequivocally that “as currently drafted, the [Michigan EM Law] is violative of the Contracts Clause … No prior legislature has had the audacity to legislate the unilateral termination, rejection, or modification of a collective bargaining agreement.”

That doesn't seem good for Orr.

Here is a May 9th article in the Atlantic on whether the emergency manager law disenfranchises black voters. And another from the Nation.

[Tempra]

And I'm also not sure I'm really addressing the same issue as you are, because I'm not quite sure what you are saying? Yes, a municipality is eligible to file Chapter 11.

But, does Orr, as the city manager, lawfully represent the municipality? Can he file on its behalf? And what court should decide that question??? There is law on the first question, but only as it pertains to unincorporated local entities, in which case the issue is decided by whether the filing party has the power to levy taxes. Further, there is an issue with regard to whether Detroit, while under state emergency management status is a municipality or some other kind of entity, perhaps even part of the state.

But it's the last issue the judge is focusing on.

There are a lot of issues related to Detroit's eligibility that need to be worked out. I am concerned with which court--state or federal-- gets to decide those issues. To me, whether a municipality can avail itself to federal bankruptcy law clearly touches on federal issues. That's not to say that there are no state law issues, there clearly are, but federal courts deal with state law every day. Why is this different? Now, I can see why the bankruptcy court might certify some or all of the state law issues to Michigan's Supreme Court, but I don't see how it can be argued that the bankruptcy court lacks jurisdiction over whether Detroit is eligible to file for bankruptcy.

ETA; judge will have a decision at 2 pm.

[Guest Raidne]

Judge will come back with his decision on jurisdiction at 2pm.

[Former Lord of Winterfell]

Wrong thread

[The Progressive]

So where is the horrible Republicans sleaze? Part of what Orr did was negotiate that the swaps would get only 75% of value. That actually sounds like a pretty good deal to the city for loans secured by specific cash collateral that was sitting in accounts.

Flow is actually making a very good argument against Raidne here ........... so unless someone else could show how Detroit could have gotten a better deal given their financial status, then I'm just not seeing how the bankruptcy filing decision was politically motivated to benefit Orr's buddies.

[Tears of Lys]

As far as I can tell from this god-afwul live blogging.

Yeah, pretty pitiful. AFAIK, only Det. News and Freep have bloggers at the scene, and neither of them are very good. although, you'd really have to have a law degree to keep up with this stuff.

[Tears of Lys]

Flow is actually making a very good argument against Raidne here ........... so unless someone else could show how Detroit could have gotten a better deal given their financial status, then I'm just not seeing how the bankruptcy filing decision was politically motivated to benefit Orr's buddies.

I think Orr has made some really smart moves throughout this whole thing. And Snyder orchestrated this as well as could be expected, honestly.

[Guest Raidne]

I'm just not seeing how the bankruptcy filing decision was politically motivated to benefit Orr's buddies.

I don't see how that could be the case either. Here is what I think is the case.

I think that the state watched Detroit try to debt-finance its way into recovery, and, as is typical of conservatives, got fed up. The difference is that Michigan's very unusual emergency financial management statute (which is probably unconstitutional on several grounds) allowed them to just take over and run the credit rating into the ground to prevent future borrowing while enacting austerity measures. And now here we are - they disagreed with the legal definition of insolvent in Chapter 9 bankruptcy law, thought Detroit was already insolvent, and then took over and made it insolvent under the definition in Chapter 9 bankruptcy law.

Maybe that will be the right call and this bankruptcy filing will be the best thing that has ever happened to Detroit. If so, it will be the poster child for austerity and Snyder will be President one day.

But this is a core point of political difference between the two parties, the people of Detroit are solidly in favor of the debt-driven strategy favored by Democrats, and that choice was taken away from them under an unconstitutional statute.

In the meantime, it's likely some Snyder donors got some sweetheart deals - but I can only say that on the basis that my friend who was otherwise correct about everything else I ended up looking up insinuated as much.

Given the stakes here in the national debate on a core political issue, I really thought some of you might share the research load on that one, but I'm not overly surprised that you haven't.

[Guest Raidne]

Orr is still oddly absent from the courtroom, but the judge appears to be going ahead anyway.