Municipal workers could be robbed of pension funds to pay big banks for payments due on interest rate swaps.
The Detroit bankruptcy is looking suspiciously like the bail-in template originated by the G20’s Financial Stability Board in 2011, which exploded on the scene in Cyprus in 2013 and is now becoming the model globally. In Cyprus, the depositors were “bailed in” (stripped of a major portion of their deposits) to re-capitalize the banks. In Detroit, it is the municipal workers who are being bailed in, stripped of a major portion of their pensions to save the banks.
Bank of America Corp. and UBS AG have been given priority over other bankruptcy claimants, meaning chiefly the pensioners, for payments due on interest rate swaps they entered into with the city. Interest rate swaps – the exchange of interest rate payments between counterparties – are sold by Wall Street banks as a form of insurance, something municipal governments “should” do to protect their loans from an unanticipated increase in rates. Unlike ordinary insurance, however, swaps are actually just bets; and if the municipality loses the bet, it can owe the house, and owe big. The swap casino is almost entirely unregulated, and it is a rigged game that the house virtually always wins. Interest rate swaps are based on the LIBOR rate, which has now been proven to be manipulated by the rate-setting banks; and they were a major contributor to Detroit’s bankruptcy.
Derivative claims are considered “secured” because the players must post collateral to play. They get not just priority but “super-priority” in bankruptcy, meaning they go first before all others, a deal pushed through by Wall Street in the Bankruptcy Reform Act of 2005. Meanwhile, the municipal workers, whose pensions are theoretically protected under the Michigan Constitution, are classified as “unsecured” claimants who will get the scraps after the secured creditors put in their claims. The banking casino, it seems, trumps even the state constitution. The banks win and the workers lose once again.
Systemically Dangerous Institutions Are Moved to the Head of the Line
The argument for the super-priority of derivative claims is that nonpayment on these bets represents a “systemic risk” to the financial scheme. Derivative bets are cross-collateralized and are so inextricably entwined in a $600-plus trillion house of cards that the whole financial scheme could go down if the betting scheme were to collapse. Instead of banning or regulating this very risky casino, Congress has been persuaded by the masterminds of Wall Street that it needs to be preserved at all costs.
The same tortured logic has been used to justify the fact that the federal government deigned to bail out Wall Street but not Detroit. Supposedly, the mega-banks pose a systemic risk and Detroit doesn’t. On July 29th, former Obama administration economist Jared Bernstein pursued this line of reasoning on his blog, writing:
“[T]he correct motivation for federal bailouts — meaning some combination of managing a bankruptcy, paying off creditors (though often with a haircut), or providing liquidity in cases where that’s the issue as opposed to insolvency – is systemic risk. The failure of large, major banks, two out of the big three auto companies, the secondary market for housing – all of these pose unacceptably large risks to global financial markets, and thus the global economy, to a major industry, including its upstream and downstream suppliers, and to the national housing sector.
Because a) there’s not much of a case that Detroit is systemically connected in those ways, and b) Chapter 9 of the bankruptcy code appears to provide an adequate way for it to deal with its insolvency, I don’t think anything like a large scale bailout is forthcoming.”
Holding Main Street Hostage
Detroit’s bankruptcy poses no systemic risk to Wall Street and global financial markets. Fine. But it does pose a systemic risk to Main Street, local governments, and the contractual rights of pensioners. Credit rating agency Moody’s stated in a recent report that if Detroit manages to cut its pension obligations, other struggling cities could follow suit. The Detroit bankruptcy is establishing a template for wiping out government pensions everywhere. Chicago or New York could be next.There is also the systemic risk posed to the municipal bond system. Bryce Hoffman, writing in The Detroit News on July 30th, warned:
Detroit’s bankruptcy threatens to change the rules of the municipal bond game and already is making it more expensive for the state’s other struggling towns and school districts to borrow money and fund big infrastructure projects.
In fact, one bond analyst told The Detroit News that he has spoken to major institutional investors who have already decided to stop, for now, buying any Michigan bonds.
The real concern of bond investors, says Hoffman, is not the default of Detroit but the precedent the city is setting. General obligation municipal bonds have always been viewed as a virtually risk-free investment. They are unsecured, but bondholders have considered themselves protected because the bonds are backed by the “unlimited taxing authority” of the government that issued them. Detroit, however, has shown that the city’s taxing authority is far from unlimited. It already has the highest property taxes of any major city in the country, and it is bumping up against a ceiling imposed by the state constitution. If Detroit is able to cut its bond debt in half or more by defaulting, other distressed cities are liable to look very closely at following suit. Hoffman writes:
The bond market is warning that this will make Michigan a pariah state and raise borrowing costs — not just for Detroit and other troubled municipalities, but also for paragons of fiscal virtue such as Oakland and Livingston counties.
However, writes Hoffman:
Gov. Rick Snyder dismisses that threat and says the bond market is just trying to turn Detroit away from a radical solution that could become a model for other struggling cities across America.
A Safer, Saner, More Equitable Model
Interestingly, Lansing Mayor Virg Bernero, Snyder’s Democratic opponent in the last gubernatorial race, proposed a solution that could have avoided either robbing the pensioners or scaring off the bondholders: a state-owned bank.
If the state or the city had its own bank, it would not need to borrow from Wall Street, worry about interest rate swaps, or be beholden to the bond vigilantes. It could borrow from its own bank, which would leverage the local government’s capital into credit, back that credit with the deposits created by the government’s own revenues, and return the interest to the government as a dividend, following the ground-breaking model of the state-owned Bank of North Dakota.
There are other steps that need to be taken, and soon, to prevent a cascade of municipal bankruptcies. The super-priority of derivatives in bankruptcy needs to be repealed, and the protections of Glass Steagall need to be restored. While we are waiting on a very dilatory Congress, however, state and local governments might consider protecting themselves and their revenues by setting up their own banks.
Ellen Brown is an attorney, author, and president of the Public Banking Institute. She is the author of Web of Debt, and a sequel, The Public Bank Solution.
Thank you Ellen and AlterNet, for another informative and innovative post.
RE: Police and Fire Retirement System of the City of Detroit – IndyMac INDX Mortgage Loan Trust 2007-AR5 [Click here for the Complaint 5-14-09]
As a homeowner who has been caught up in the OneWest Bank HAMP modification scam and paper rape for nearly 3 years – trying to pay my mortgage; and as a paralegal who assists homeowners and collects Assignments of Mortgage – not only did you get screwed by deregulation, the INDYMAC trust specifically noted in the complaint above [INDX Mortgage Loan Trust 2007-AR5] did not have timely assignments and mine was one of them – along with many others – if any of them made it at all.
That’s right – the REMIC was jeopardized from the very beginning and we homeowners do not understand why you as investors haven’t contacted us directly to find out if our loans were assigned, if our payments were made to your trust and/or if we have been screwed around too by the banksters, the FDIC, the Treasury – just like you.
Not only would should you create a State Bank – you should demand all the mortgages in the trust and renegotiate the mortgages with the homeowners. Think about it.
In the IndyMac INDX 2007-AR5 there are 2925 Active/Inactive loans (properties). If you reconstructed new mortgages and/or rentals with these families (who are just like the families in your unions), even at $900 a month (as an average) – that would garner you $31,590,000 (million) a year. You need to feed your pension funds and people want to keep their homes. The foreclosures have not benefited the investors or the pension funds – or Detroit would not be in bankruptcy.
Detroit was induced into a bad securities scheme – but your ticket out is the fact that the loans were never assigned to the trusts – the trusts are empty and the REMICs have failed. Detroit, you can stop this tragedy by creating your own bank and taking control of the mortgages and we (homeowners) can help you prove the fraud.
I don’t know how these fabricated assignment documents look to you in Detroit – but they look like fraud to us.
If you are a homeowner with an IndyMac INDX 2007-AR5 alleged trust and Deutsche Bank pushing to foreclose or already foreclosed, whether judicial or non-judicial please send your assignment of mortgages to: email@example.com so we may send them to the Police and Fire Retirement System of the City of Detroit as proof these loans were never timely assigned to the trust.
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This letter was sent to me for us to spread the word far and wide and send this to this court mentioned below to help homeowners use this for case law.
PLEASE GET LETTERS WRITTEN AND GET THIS PUBLISHED! WE NEED THIS CASE!!!! SHARE AND DO IT PLEASE!!! ALL OF CALIFORNIA NEEDS TO REACT TO THIS AND SO DO OTHER STATES, WRITE LETTERS PLEASE!!!
Conversation started today
IMPORTANT — Action needed before 8/18, please SPREAD THE WORD IN ALL CHANNELS by forwarding the email below (or your own version)!! (Feel free to add anyone to this stream.)
IMPORTANT – PLEASE WRITE A LETTER TO THE CAL COURT OF APPEAL 5th
An important California appellate decision was just rendered about July 31, 2013, but we need your help to prevent them from burying it as “unpublished”.
(see attached Appellate Opinion – “unpublished” and sample letter in RTF format)
In Glaski v Bank of America, the allegations that Assignment after the Closing Date of a Securitization Trust was void, and forgery by the VP of a foreclosure firm signing as VP of a Bank were dismissed on demurrer, but the appellate court reversed the dismissal.
Banks have been violating NY law and IRS Remic law for a long time, and the courts have ignored it UNTIL NOW. See http://www.americanloanaudits.com/pool/, and work by Neil Garfield, among others, for more details on the immense fraud the banks have been perpetrating on homeowners & investors.
This appellate decision in .Glaski v Bank of America is the first shining light for justice we’ve seen, but they want to keep it unpublished, so the homeowners can’t use it.
It’s up to us to try to push for its publication by writing letters.
2013 California Rules of Court, rule 8.1120
Requesting publication of unpublished opinions
Any person may request that an unpublished opinion be ordered published.
The request must be made by a letter to the court that rendered the opinion, concisely stating the person’s interest and the reason why the opinion meets a standard for publication.
The request must be delivered to the rendering court within 20 days after the opinion is filed.
The request must be served on all parties.
That means writing a letter by about August 18 to
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIFTH APPELLATE DISTRICT,
2424 Ventura Street
Fresno, California, 93721
and also served on
Law Offices of Richard L. Antognini and Richard L. Antognini;
2831 Southcreek Drive. Lincoln, California 95648-8284.
Law Offices of Catarina M. Benitez and Catarina M. Benitez, for Plaintiff and Appellant Glaski.
2014 Tulare Street Suite 400 Fresno, CA 93721
AlvaradoSmith, Theodore E. Bacon, and Mikel A. Glavinovich, for Defendants and Respondents.
633 W. Fifth Street, Suite 1100
Los Angeles, CA 90071
Suggested wording would be like:
I hereby request the publication of the appellate opinion on the APPEAL (from a judgment of the Superior Court of Fresno County. Alan M. Simpson, Judge) in the Case Glaski v Bank of America , Case # F064556 (Superior. Ct. No. 09CECG03601)
See the sample attached letter from Jim Krage.
I know from my case the immense value in PUBLISHING APPEALS. I don’t understand why this one was not published.
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THE DESCENDANTS OF THE MERCHANT OF VENICE IN ACTION IN DETROIT
FED JUDGE WILL ISSUE VERDICT DEC. 3 ON LEGALITY OF DETROIT DECLARING BANKRUPTCY; NATURAL LAW REQUIRES GLASS STEAGALL
November 26, 2013 • 3:23PM
Federal Bankruptcy Judge Steven Rhodes said in a court filing yesterday, that on Dec. 3, he will hold a hearing at 9 am to discuss his verdict on whether to authorize the Ch. 9 bankrupcty filing by the city of Detroit; his written statement will be made available later. Rhodes’ action is considered highly unusual, compared to standard law practice; he is expected to speak very carefully on the record, in order to avoid grounds for appeal.
In citation of a debt of $18 billion, the Detroit bankruptcy filing is the largest in U.S. history, but is also one of the most blatant trans-Atlantic examples, of the gutting of the physical economy, and the predations by a swarm of mega-banks, which foisted swaps and other financial rip-offs of city finances. Detroit’s situation alone exemplifies why there must be a re-institution of the Glass-Steagall law, and a bankruptcy-reorganization of the national economy.
The Detroit bankrupcty filing was made in July by a cohort of those desiring to gut the city, including the governor and state appointed emergency manager Kevin Orr. The filing is contested by city workers and constituents on various grounds, including that there has been no good faith approach to the public good, in the negotiations, in the assertions of insolvency, and in the demands by the city emergency proposals to cut city worker pensions, sell assets and otherwise demolish what remains of Detroit.
There are thousands of other cities, counties and various local governments in extreme, impossible financial circumstances, in particular throughout the cities of the former industrial heartland of North America—the Great Lakes states.
In Pennsylvania, for example, there are 21 localities on the state’s “financially distressed” roster, mostly in the beaten-down former coal and steel counties. Dozens of cities and townships, including the state capital, have called on Washington, D.C. to re-instate Glass-Steagall and re-start the economy.
In 1987, “Act 47” was passed by Pennsylvania, under which the state could declare a locality in financial trouble, and impose severe austerity measures, called “restructuring.” The roster (and date of listing) includes Pittsburgh (2003) and many nearby Allegheny County former heavy industry centers: Clairton (1988), Duquesne (1991), Rankin (1989), Braddock (1988); as well as Johnstown (1992), in the coal county of Cambria; Altoona (2012), a former rail-machining center; and many of the old eastern coal centers, West Hazelton (2003), Nanticoke (2006), Scranton (1992), and finally, Harrisburg (2010), the state capital. ” http://larouchepac.com/node/29021
” …….Some experts are now estimating that the payments to the megabanks UBS and Bank of America, which Detroit faces on the “interest-rate swaps” derivatives it was conned into buying, may even be considerably larger than the $225 million reported in EIR’s “Detroit Facts”. According to both the Financial Times and columnist Yves Smith’s Naked Capitalism blog, the city may face immediate looting of $700 million, on top of more than $100 million a year lost to the city for the past eight years on these derivatives bets. The appointment of Kevyn Orr as emergency manager by Gov. Rick Snyder on March 14, was itself a “credit event” potentially triggering a $400 million derivatives payment by the city, one which Orr and the banks may be “not bringing up” until bankruptcy court hearings start…….” http://larouchepac.com/node/27564
” Cities and counties are, however, beginning to pay the costs of Detroit “emergency manager” Kevyn Orr’s dirty work for UBS, Bank of America, and their ilk, in steadily rising municipal bond interest rates. Orr said in an early interview that he “didn’t care” what impact his actions had on municipal bond rates, as long as he made the cuts in Detroit. Already, four Michigan counties/cities have had to withdraw bond issues in the past week: Genessee County (A2 rating), $53 million issue; Saginaw County (Aa3 rating), $60 million issue; Battle Creek (AA) $16 million school bond issue; and Hamtramck, a school bond issue. All were contemplating exorbitant rates of 6% or higher. Chicago’s treasurer announced on Aug. 6 that the city’s annual interest cost estimates have risen by $2 million in past two weeks.” http://larouchepac.com/node/27666
BANK OF AMERICA is also connected with the person of Warren Buffet a friend of JACOB ROTHSCHILD and EVELYN DE ROTHSCHILD.
JACOB ROTHSCHILD “Hosted the European Economic Round Table conference in 2002 at Waddesdon Manor, attended by such figures as James Wolfensohn, Nicky Oppenheimer, Warren Buffet, and Arnold Schwarzenegger ” https://wikispooks.com/ISGP/organisations/introduction/PEHI_Jacob_de_Rothschild_bio.htm https://wikispooks.com/ISGP/organisations/introduction/PEHI_Evelyn_de_Rothschild_bio.htm
Bank Of America and Merrill Lynch ( subsidiary of Bank of America ) are also related with the Edmond De Rothschild, owned by BENJAMIN DE ROTHSCHILD and ARIANE DE ROTHSCHILD, through the persons of Gerald Levy, Matthieu Walterspiler, Barbara Colombo, Beate Bakker, etc… https://en.wikipedia.org/wiki/Benjamin_de_Rothschild https://en.wikipedia.org/wiki/Ariane_de_Rothschild
http://www.linkedin.com/pub/gerald-levy/60/b49/b87 http://uk.linkedin.com/in/walterspiler http://www.linkedin.com/pub/barbara-colombo/26/b21/766
UBS IS RELATED WITH BLACKSTONE THROUGH THE PERSONS OF KARL KNAPP AND BRUCE AMLICKE.
BLACKSTONE GROUP IS CONTROLLED BY THE ROTHSCHILDS AND IS CONNECTED WITH DEUTSCHE BANK, THE BUSH FAMILY, CARLYLE, AL QAEDA, ETC. .
THERE ARE LINKS BETWEEN THE UBS AND THE ST. JAMES’S PLACE OWNED BY JACOB ROTHSCHILD FOR EXAMPLE THROUGH THE PERSONS OF JOHN BREWER AND SUSAN HUTTON. http://uk.linkedin.com/pub/john-brewer/15/b97/431 http://uk.linkedin.com/in/susanhutton1
” From his headquarters in St James’s Place in London, Jacob Rothschild has cultivated an influential set of clients, business associates and friends who have extended his interests far beyond the normal scope of a banker. ” https://en.wikipedia.org/wiki/Jacob_Rothschild,_4th_Baron_Rothschild
EVELYN DE ROTHSCHILD SPEAKS VERY WELL ABOUT UBS: ” don’t forget that one of the biggest examples of a bank which – to me – was highlighted, is the wonderful, most prominent banking institution in the world, was UBS. ” http://www.abeldanger.net/2012/07/november-2010-bloomberg-interviews.html
” Stefano Rossi that in a famous interview speaks of virtuous countries and of the impending crisis of Greece and of Spain, is CEO of EDMOND DE ROTHSCHILD and began his career in London in 1988. In 1989 he returned to Italy to join Citibank.
In 1991 he moved to S.G. Warburg and subsequently, with the company’s acquisition by SBC and the subsequent merger with UBS, was promoted in 1996 to Head of Sales at UBS. Appointed in 2001 stock market Manager and Managing Director of UBS SIM, Rossi holds the position of CEO of the italian SIM OF UBS until June 2007. During his career at UBS SIM, Stefano Rossi and his team have been elected for eight times better Italian StockBroker from the Institutional Investors Survey.” http://theyellowbrickroadfreeblog.wordpress.com/2012/05/11/the-rothschild-clan-in-italy-sleuth-bankers/
THE EDMOND DE ROTHSCHILD IS CONTROLLED BY BENJAMIN DE ROTHSCHILD AND BY HIS WIFE ARIANE DE ROTHSCHILD.
https://en.wikipedia.org/wiki/Benjamin_de_Rothschild https://en.wikipedia.org/wiki/Ariane_de_Rothschild ………………….
” The fight for a Glass-Steagall type banking sepearation in Switzerland is now reaching the boiling point, with the Swiss Banking Association being forced to come out in the open and attack proposed legislation in Switzerland for Bank Separation, while a grouping of political forces are now consolidating their fight to force the legislation. ………………………….
UBS chief Sergio Ermotti, on the contrary, chose to declare war in an interview with the economic magazine L’Agefi. While the apparent subject of the interview was the UBS gains from its investments in Vodafone, his remarks came down to an attack on the bank separation initiative, and, in particular, on SPP leader Christoph Blocher. In view of those financial gains, Ermotti said, it is understandable why people who want to strengthen the Swiss financial center and its banks, keep pushing bank separation. “It is also fundamentally difficult to carry out a professional discussion on the issue,” he protested….. ” http://larouchepac.com/node/28272 http://www.telegraph.co.uk/news/politics/8875360/Taxman-accused-of-letting-Vodafone-off-8-billion.html
( More Evidence of How the British Looted Detroit to Death http://larouchepac.com/node/27516 )
( Detroit: Pensions or Derivatives? Glass-Steagall Would Have Made the Choice http://larouchepac.com/node/27528 )
( CUTS IN HEALTH INSURANCE FOR DETROIT CITY WORKFORCE http://larouchepac.com/node/28731 )
( UBS, Scared by Glass-Steagall, Announces Fake Pre-Emptive ‘Separation’ http://larouchepac.com/node/28739
THE JUDGE STEVEN RHODES WILL DECIDE IN THE RIGHT INTEREST OF THE POOR PEOPLE OF DETROIT OR IN THE INTEREST OF THE USURERS OF LONDON AND GENEVA ?
http://wikimapia.org/6825620/fr/Chateau-de-Pregny http://www.panoramio.com/photo/77169200 https://en.wikipedia.org/wiki/Waddesdon http://www.waddesdon.org.uk/ http://www.thefullwiki.org/Waddesdon_Manor http://www.thefullwiki.org/Ascott_House http://www.breathingenglishair.blogspot.fr/2012/04/ascott-house-buckinghamshire.html