Tag Archives: bankruptcy

City of Detroit declares bankruptcy

Fried Dough (CC)

Fried Dough (CC)

The City of Detroit is bankrupt. Conservatives have been pointing out the problem with municipalities of all sizes continuing to spend beyond their means, and now Detroit has become the largest city to date to officially apply for Chapter 9 bankruptcy protections in Federal Court. As reported in the Wall Street Journal:

The Chapter 9 case filed in U.S. District Court for the Eastern District of Michigan came after Kevyn Orr, the emergency manager, failed to reach agreements with enough of the bondholders, pension funds and other creditors to restructure Detroit’s debt outside of court. The final decision rested with Republican Gov. Rick Snyder, who had appointed Mr. Orr as Detroit’s overseer in March.

It was expected that the city would report long-term liabilities close to $20 billion. The city’s assets were less clear, but Mr. Orr had called the city functionally insolvent and recently missed a payment to the city’s pension system of nearly $40 million.

Detroit has been in a state of decline for many years, primarily due to residents and businesses moving out of the city – migration to the suburbs. To make up for shortfalls in revenue, the city has been borrowing not only for day-to-day operational expenses, but also to meet pension and health care obligations for retirees. The latter has been an issue for many cities and municipalities nationwide, as the “Baby Boomer” generation continues to reach retirement age. As for Detroit, the city’s population has been dropping since an all-time high in 1950 of around 2 million residents. Today, the population of approximately 700,000 is after a 26% drop between the years 2000 and 2011.

Armor-Clad CA Mayor Seeks Support

stockton mayorStockton, the small resort city South of Sacramento, California sought bankruptcy protection from its obligations last summer. The bankruptcy filing by Stockton, more than 290,000 residents, has been closely watched by both bond insurers who guaranteed the city’s debt and CalPERS, the state pension fund for public workers.

Retiree health care, financed by most California cities on a pay-as-you-go basis, and pension payments based on union agreements pushed Stockton, along with several other California cities into bankruptcy.

New Stockton mayor, Anthony Silva brought with him armor and a helmet (which he donned) during his unique State of the City address this week. The mayor plead with city residents to join him in helping clean up the city both literally and figuratively. The mayor believes raising taxes is the only way the city will be able to improve safety in the crime ridden city. At over 14% unemployment it is expected that Silva will meet opposition among both the council and residents to his plan.


It Can Happen Here

For years now, the Euro zone has been experiencing difficulty absorbing the costs of bailing out relatively small countries with relatively small economies that have relatively small amounts of debt.

Most recently, Euro zone leaders agreed to fund a bailout of Cyprus with a deal that includes taxing private bank deposits.  The deal to fund 10 Cyprusbillion euros worth of rescue loans for Cyprus imposes a 6.75 to 9.9 percent tax on those with cash in Cyprus banks.  Without the EU bailout Cyprus cannot avoid default, but the unexpected and unprecedented decision to take money from private depositors fueled a sense of crisis across the euro zone and led to a run on Cyprus banks by depositors.

The Cyprus deal could lead savers in similarly indebted countries like Greece, Italy and Spain to withdraw money from their banks, leading to a regional economic crisis that would affect bond and stock markets world-wide.

Imagine the difficulty faced by the world’s economy when the United States of America can no longer finance its debt.

It can happen here.

Greece recorded a government debt to GDP of 170.60 percent in 2011.  In 2011, the United States government debt to GDP ratio was about 100 percent.  Should the United States continue deficit spending at current rates, the United States will soon surpass Greece in debt to GDP ratio.


What the United States government must do is stop spending money it does not have.

Before that will happen, American taxpaying voters must be made aware of the realities of the situation.

For so long as American taxpayers are unaware of the danger that looms just over the horizon, their concern will be focused on maintaining current levels of government payouts for Social Security, Medicare and Medicaid.  Until American voters understand that not restructuring big government socialist programs will bankrupt the U.S., they will not vote for the necessary revisions.  They will continue to vote for the status quo.

The truth about the danger American debt poses to the U.S. economy is not being disclosed by “progressives;” be they politicians, media pundits, college professors, Hollywood producers or government bureaucrats…including but not limited to winners of the Nobel Prize for economics.

It does not take a Nobel Prize winner to see that whole sections of the European economy have governments whose budgets are in horrible shape and teetering on the brink of true insolvency.  It does not take a genius IQ to realize that the cause of debt in those countries is big government spending money it does not have on socialist programs to support citizens dependent upon government for their existence.

It also does not take a Nobel Prize winner or a genius IQ to find information that makes it past the “progressive” filter NBC, ABC, CBS, CNN, The New York Times, The Huffington Post, The Los Angeles Times, Time Magazine, Newsweek and the rest of the “progressive” Party Pravda use to misinform the American public.

All it takes is a desire to learn the truth and a willingness to search beyond the filtered information used by “progressives” to nudge people into believing what “progressives” wish them to believe.

The last time America faced an existential threat during WWII, Americans fought and died by the thousands on foreign lands.

Is asking Americans to view the “mainstream media” with a skeptical eye and seek out second opinions now too much to ask?

Love. Early American Style.

Can Obama Pick ’em, Or What?

Can President Barack Hussein “kill list” Obama pick winners, or what? But it really does not matter to him since he is using taxpayer money to invest in companies. There is a myriad of topics about which to write about his picking prowess, so I will limit myself, in the interest of the typical liberal reader attention span, to only two topics: the “green or renewable” energy boondoggle, and the “auto industry bailout” boondoggle, particularly General Motors (GM).

  • First, there is the green or renewable energy boondoggle. There are many paths we can take here. Can anyone say Solyndra? Or SunPower? Or Beacon Power? Or Ener1? Or Evergreen? Or SpectraWatt? Or Nevada Geothermal? Or Abound? Or …? Despite Media Matters‘ attempt to categorize them all as low risk loans, they ALL cost taxpayers quite a lot of money.But this statement, from Peter Schweizer in his book Throw Them All Out, pretty well says it all: More than 70 percent of DOE grants and loans under Obama went to Democrat donors and bundlers. For example:
    • Obama bundler George Kaiser was a major stakeholder in Solyndra through his Kaiser Family Foundation.
    • Steve Spinner, after bundling more than $500,000 for Obama in 2008, was named to the White House transition team and later served as “chief strategic operations officer” of the DOE loan program that funded Solyndra.
    • John Doerr has personally contributed more than $2 million to Democrats over the past 20 years. Doerr is a principle at Kleiner Perkins Caufield & Byers (KPCB). Of the 27 companies list in KPCB’s “green-tech” portfolio, 16 received some form of taxpayer support.
    • Steve Westly was a National Finance Committee member of Obama’s 2008 campaign and currently sits on the DOE’s Energy Advisory Board. Westly has bundled at least $700,000 in campaign donations for Obama, and personally given about $260,000 to Democrat campaigns and committees since 2007. Westly’s investment firm had a financial stake in four green energy companies that received more than half a billion dollars in federal funding in 2009.
  • Second, GM. In December, 2009 (under George W Bush), GM received $13.4 billion from the $700 billion Troubled Asset Relief (TARP) program. Then, in June, 2009, GM file for bankruptcy. The US Treasury Department (under Barack H. Obama) provided GM with $30.1 billion. Does the phrase “Throwing good money after bad” come to mind? Anyway, no matter how you slice it, GM received $43.5 billion, 69.2% of that from the Obama administration.So how is the GM investment, from a taxpayer perspective, doing? We know that, from an “auto worker unions supporting Obama” perspective, the investment has done/is doing quite well.Following its June, 2009, bankruptcy, GM stock was offered in November, 2010, at $33 per share. Today (July 19, 2012), GM is at $20.10. The analysis offered here is based on the July 2 price of $19.57, so everything offered here is still pretty much up to date. Just reduce our exposure by about 1%. But this source shows the price for the past year, so we taxpayers may be in for more of a bath than what is offered here predicts.

    We taxpayers own a 26.5% stake in GM. Based on the July 2 price, we are out a whopping $16.6 billion. We own 500 million shares of GM, and those shares are now worth $9.8 billion.

    But wait, as they shout on TV, there’s more! Obama let GM keep $45 billion (book value $18 billion) in past losses (usually eliminated along with debts in bankruptcy) to offset future profits. So when GM earned a $7.6 billion profit in 2011, it paid NO taxes. Include that $18 billion gift, and taxpayers’ true loss climbs to nearly $35 billion.

    The share price would have to rise to about $53 before we could break even!

    But wait, there’s even more. In late February, 2012, GM bought a 7% stake in PSA Peugeot Citroën, a French company. So what, you ask. Now the incredibly inept policies of French president avowed socialist François Hollande are becoming quite personal. PSA Peugeot Citroën has a greater than 50% chance of debt default, even as Hollande said PSA Peugeot Citroën must renegotiate a plan to lay off 8,000 workers and to close a plant. Hollande said that PSA Peugeot Citroën must lessen its social impact, even as he acknowledged that PSA Peugeot Citroën is currently losing €200 million per month.

    And we all know what a winning investment the Chevy Volt has been, making absolutely no money, and costing us taxpayers hundreds of thousands of dollars each. In fact, GM has announced that it will assemble 2013 Impalas and Malibus at the underutilized Hamtramck assembly plant.

    GM recently announced a 60 day money back guarantee policy for all new Chevy models, including the Chevy Volt which receives a $7,500 tax subsidy. This buy back policy establishes a possible tax fraud situation. Will it happen? Only time will tell.

We can all see the obvious, that the Obama corporate investment strategy is based not on highest (or any) taxpayer money return, but on crony capitalism and political payback. I just don’t think we can afford another four years of his investment strategy.

But that’s just my opinion.

Please visit RWNO, my personal web site.

Stockton, California as an Example of a Flourishing City

Stockton, CA – This city may be the first in California to declare bankruptcy. The city, in spite of cutting police, fire, and anything else it could think of, is still running in the red, and cannot make its bills. Why? Pensions and benefits for retirees have literally taken over the budget to the point where the city has been cutting back on services to residents to meet those bills. And the first ones to scream if Stockton does declare bankruptcy will be the unions. The following clip explains at least in part which city bills will take priority in the case of bankruptcy.

While many businesses have gone down the drain because of pensions and retiree benefits draining their assets, it is not as common as it once was. That probably has something to do with the fact that there aren’t as many unions in the private sector anymore. What we are seeing in Stockton is the future for many cities across the country, primarily because of contracts negotiated by public sector unions. While this is a very basic statement about the impending problem, it isn’t extremely difficult to understand. It is yet another economic issue that is at least an indirect result of the Baby Boomer generation reaching retirement age. But, unlike Social Security, this problem is theoretically negotiable, especially when cities make the decision to declare bankruptcy.

At that point, all contracts with the unions are nullified, and cities are in a position to re-negotiate terms with public sector unions. But, would we have been in this situation in the first place if city leaders had started thinking like business owners years ago? Probably not. Conservatives have been saying for years that spending money without serious plans to repay debts in the future is a mistake. In Stockton, even the leaders have admitted that they spent too much when times were good, and failed to “save for a rainy day.” But, they’re politicians, not business people.

Matt Edelstein, otherwise known as Shoq on Twitter, decided to weigh in on this. Well, he decided it was a good idea to pose what he obviously thought was a difficult question for me. I didn’t respond via Twitter, so maybe he’s deluded into thinking that he stumped me.

If municipalities were run more like big businesses, it is less likely that they would end up like Stockton. As for businesses making the laws of the land, gieven our current economic woes, that is exactly what we need. It has been made abundantly obvious that every level of government in this country is either ill-equipped, or unwilling to do what needs to be done to kick start our economy. More often than not, the fact is that government doesn’t need to do a damn thing – it needs to stop what it’s doing, and get the hell out of the way.

Can This City Be Saved?

What happens when a city spends more than it takes in? Caught up in the boom times of the Silicon Valley, this city bought land and buildings beyond what it could afford, expecting that value would continue to rise. Today it is defaulting on bond repayments causing banks to seize property and laying off public workers threatening the safety of the citizens. Take a look at Stockton, CA as it edges closer to bankruptcy.


American Airlines' Parent Company Files Bankruptcy

This just in from CBS.com:


DALLAS – American Airlines’ parent company, AMR, filed for Chapter 11 bankruptcy this morning.

American lost $868 million during the first nine months of this year, and was the only major U.S. airline to lose money last year.

AMR Corp. and AMR Eagle Holding Corp. says they filed voluntary petitions to reorganize.

It says the move is in the best interest of both companies and its shareholders.

American has been unable to reach a new cost-saving contract with its pilots. It has been trying to upgrade its aging fleet of planes, and has not merged with another carrier, like many of its competitors… [read more]

RNC: “Give It To Me”

On Thursday, the Republican National Committee published a news release and video detailing Obama’s willingness to take responsibility for the economic situation in America and the results.

Obama Fails

Obama: “My administration has a job to do as well. That job is to get this economy back on its feet. That’s my job, and it’s a job I gladly accept. I love these folks who helped get us in this mess and then suddenly say, ‘Well this is Obama’s economy.’ That’s fine. Give it to me. My job is to solve problems, not to stand on the sidelines and carp and gripe. So, I welcome the job. I want the responsibility.”(President Barack Obama, Remarks At Macomb Community College, Warren, MI, 7/14/09)


  • $1.65 Trillion: Projected Federal Deficit For FY2011 – Will Be The Largest In U.S. History. (OMB, 2/14/11)
  • $1.42 Trillion: Federal Budget Deficit For FY2009 – Highest In U.S. History. (CBO, 10/7/10)
  • $1.29 Trillion: Federal Budget Deficit For FY2010 – Second Highest In U.S. History. (CBO, 10/7/10)
  • 44.6 Million: Americans Receiving Food Stamps. (The Wall Street Journal, 5/31/11)
  • 14.0 Million: Unemployed Americans. (Bureau of Labor Statistics, Accessed 7/14/11)
  • 6.8 Million: Foreclosure Filings Since Obama Took Office. (RealtyTrac, Accessed 7/14/11)
  • 2.5 Million: Jobs Lost Since Obama Took Office. (Bureau of Labor Statistics, Accessed 7/14/11)
  • 2.0 Million: Private Sector Jobs Lost Since Obama Took Office. (Bureau of Labor Statistics, Accessed 7/14/11)
  • 1.8 Million: Jobs Lost Since Obama’s Stimulus Was Passed. (Bureau of Labor Statistics, Accessed 7/14/11)
  • 1.59 Million: Personal Bankruptcies In 2010. (United States Courts, 2/15/11)
  • 9.2%: Unemployment Rate. (Bureau of Labor Statistics, Accessed 7/14/11)

Why Isn’t the Obama Plan Working?

The Obama plan is failing because the plan is not focused on rescuing the economy through private sector jobs and a better business climate. Obama has spent the sum of his tenure pandering to Big Labor, green energy and Wall Street. He’s sent his NLRB attack dog after Boeing, imposed a moratorium on drilling, wants to raise taxes on entrepreneurs and more. The stimulus mainly went into the pockets of the unions and did nothing for the employment picture. Obama’s gifting of GM to the unions at the cost of the tax payer is a further demonstration of the administrations desire to help unions at any cost to the country.

Quite simply, Obama’s plan is failing because it was never intended to help any of us – the people.