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The PJ Tatler

by
Stephen Green

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April 1, 2013 - 11:11 am

Move over Cyprus, the looters are swarming over Stockton. The city is in bankruptcy, and an important decision will come down today:

Bond-holders, taxpayers and government officials throughout the country will be listening to U.S. Bankruptcy Judge Christopher Klein’s expected ruling on Monday as he decides whether the city may remain in bankruptcy and pursue a plan that stiffs its bond-holders.

If Klein sides with the city, then municipalities will face a disturbingly low bar for pursuing bankruptcy. They will be emboldened to choose Stockton’s course—i.e., using bankruptcy as a strategic policy tool to offload debts without having to confront the main reasons that they went bankrupt in the first place, such as lush pensions. Bankruptcy will no longer be a policy of last resort. This should have an impact on bond markets.

If the city wins the case, argued March 25-27 in the Sacramento federal courthouse, then the public-sector unions and the scandal-plagued California Public Employees Retirement System are right. No matter what problems befall a city, public services and taxpayers suffer first while union members and public retirement systems are protected.

Just ask Chrysler bondholder if it’s possible to have the law set aside to protect the unions in Obama’s America.

UPDATE: As if on cue, the bankruptcy judge moves against the bondholders.

Stephen Green began blogging at VodkaPundit.com in early 2002, and has served as PJMedia's Denver editor since 2008. He's one of the hosts on PJTV, and one-third of PJTV's Trifecta team with Scott Ott and Bill Whittle. Steve lives with his wife and sons in the hills and woods of Monument, Colorado, where he enjoys the occasional lovely adult beverage.

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All Comments   (6)
All Comments   (6)
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Politicians have always bought votes by over-staffing governments and by promising future retirement benefits without funding them. Empires usually collapse because they eventually cannot satisfy the metastasizing greed of the folks who run them, and that is true from ancient Rome through to the Soviet Union. It unfortunately looks as if our turn is coming up.
1 year ago
1 year ago Link To Comment
After 23 years, a friend took early retirement from Stockton PD last year. His retirement pay? $800 per month more than he was taking home while working full time.
1 year ago
1 year ago Link To Comment
I think you might be looking at this the wrong way. If Stockton gets to stiff its bondholders that means that no deep blue state is going to have assess to the capital markets at affordable interest rates. They will lose their ability to borrow. This is Pyrrhic victory for the unions. The good news will be that pension benefits will be protect for those who keep their jobs. The bad news is that a lot public employees will be joining the ranks of the unemployed.
1 year ago
1 year ago Link To Comment
"Just ask Chrysler bondholder if it’s possible to have the law set aside to protect the unions in Obama’s America."

Yep. Courts love "precedents". Obama should be called "Mr. Precedent".

Other municipalities should be offering amicus briefs to remind the court of what will happento them (the municipalities) and their ability to borrow, if the bondholders get stiffed.

There is rapidly becoming no safe place to keep your money. The Beast must be fed. Sacrifices must be made.
1 year ago
1 year ago Link To Comment
The Beast WILL be fed.
1 year ago
1 year ago Link To Comment
So the bondholders will be left with worthless paper, but the unions will be left with Stockton's tax base? I'd prefer the worthless paper, thank you.

If they can't cut the lavish pensions, Stockton will become like a 1980's airline and file bankruptcy again in about 5 years.
1 year ago
1 year ago Link To Comment
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