April 1, 2013

“Judge: Stockton, Calif., Can File for Bankruptcy”

And because the city government has protected by way of state law the government union employees whom they rely on to keep them in power, one hand washes the other, and the creditors get fucked (in theory:  here, it’s the insurers who get fucked, and that’s probably not much to cry over, given that they themselves banked on the implausibility of a city going in to default) while the public sector unions don’t suffer at all — and so have no reason ever to believe they must re-negotiate any of the benefits handed to them at the expense of the taxpayers.  Because the pensions must be paid, basic services paid for by tax payers would have to be cut.  By state law.  And, well, too big to fail.

Now, every Democrat-led state government can take a break ramming through “anti-gun violence” measures and instead hurry a vote to make it state law to protect the pensions of government employees — even though they themselves spent the money guaranteed to those pensions, then claim they’ll have to cut basic services without bankruptcy because the law they passed “forces” them to pay it back.

The Democrat don’t suffer.  The public sector unions don’t suffer.   In fact, they can lock themselves into permanent power without fear of repercussion.  They only have to pay back pennies on the dollar — and then they enrich themselves with the difference.

Nice work if you can get it.Oh well. I suppose we can always count on John Roberts to save us. Amiright?

(thanks to Pablo)

Posted by Jeff G. @ 3:43pm
16 comments | Trackback

Comments (16)

  1. Can’t we just call up an earthquake and dump ‘em all into the ocean?

  2. Is it just me, or does this decision mean that, going forward, Stockton (and every other CA city) is going to have a difficult if not impossible time securing any and all loans or funding from the private sector? Who would be dumb enough to lend a CA city money now? The BK court just effectively ruled that a contract is not worth the paper it’s written on.

    The phrase “Pyrrhic victory” comes to mind.

  3. At that moment, thousands of miles away, John Roberts awoke suddenly from a nap and shouted “It’s a tax!”

    Because, I mean, taking your money, blowing it on hookers and booze, borrowing more to do the same, and then stiffing both sources – how is that not a tax?

    Excuse me, Imma go tax a bank.

  4. And good luck getting your residents to agree to tax increases in the future. The only time in the last 5 years that people in CA agreed to a “temporary” tax increase was Prop 30, which in my opinion only passed for 2 reasons: (1) it was sold a a tax on the “rich” (pay no attention to the sales tax increase too), and (2) it was sold a “funding for education”. Since it was just publically revealed that 100% of the Prop 30 revenue will go to paying for public employee pension shortfalls (zero dollars for education), I think the brain trust in Sacramento will be unable to repeat Prop 30 any time in the near future.

  5. “Is it just me, or does this decision mean that, going forward, Stockton (and every other CA city)”

    Fixed that for you. :-)

    The writing’s been on the wall here since Obama stole the money from the GM bondholders.

  6. Thanks, SBP! Clarity is important.

    The writing’s been on the wall here since Obama stole the money from the GM bondholders.

    True dat. Except that now Wall Street has proof that investing in cities is just as risky as investing in private companies (which is what GM proved).

  7. At that moment, thousands of miles away, John Roberts awoke suddenly from a nap and shouted “It’s a tax!”

    To be fair, he does that nearly every day. At least when in robes.

  8. daveinsocal –

    See my previous post. As I surmise there, the longterm fallout could be that no private sector funding will go to these cities. At which point the federal government, if it’s being run by Democrats, will declare those cities too big to fail, will raise taxes on us, and that money will go to keep the Dem constituency flush — and therefore the Dems re-elected.

    A big fucking scam.

  9. that investing in cities is just as risky as investing in private companies

    harrisburg pa- ask me about my incinerator

  10. Jeff, sorry, skipped right to the later post and missed that.

    I have to say that I have doubts about the ability of the gov’t to effectively raise taxes to bail out”too big to fail” cities or states. Look at the outcry after the Jan 1st ending of the payroll tax “temporary reduction”. And although a tax on the “wealthy” always sounds good to the unwashed masses, the gov’t will have to go after the middle class if they want to rake in the serious money. I doubt it will be received well.

    And just imagine the reaction when DC announces that “City X is too big to fail and we must bail it out”. I imagine that the reaction of the majority of this country, namely those NOT living in or around city X, will be “f*ck city X”. Same applies to “State X” or “county X”.

  11. And let me just clarify that, as a thoroughly fed up CA resident, if (but more likely when) my state does go begging to DC for a bailout to stave off what is in my mind a richly deserved collapse, I sincerely want the rest of the country to say “F*ck You CA”.

    That will be a great excuse for the wife and I to execute Operation GOOD (Get Out Of Dodge).

  12. Uh nh, daveinsocal… The time for GOOD plans was yesterday, at the very latest, today.

  13. If I were a bond insurer I’d give California the Magpul treatment.

    “Dear [name of California municipality here] bondholder: due to a recent decision by a federal bankruptcy judge in a bankruptcy proceeding involving the city of Stockton, California, we are canceling all policies covering bonds issued by California municipal governments. Apparently you were right, and cities can default on bonds now, even before having to restructure their longterm fiscal obligations (who knew, right?), so if you choose to continue investing in what amounts to junk bonds, you’re on your own with your bare ass hanging out for everyone to see.

    “Thank you for having chosen us to try to cover that ass, but we have imperatives of our own, and eating your losses isn’t one of them.”

  14. “P.S.: good luck dumping the paper [name of California municipality here] sold you. On the bright side, you probably won’t need to buy toilet paper for a while now.”

  15. As I intimated in the other thread, the bonds held by any institutions are likely insured with credit default swaps.

    But hey, they were tax-free, so look at all the money you saved!

  16. The rehypothecation dominoes have been carefully paced and the first one is about to be knocked over.

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