ALJAZEERA: …The case concluded in lightning speed by bankruptcy standards. The success was largely due to a series of deals between Detroit and major creditors, especially retirees who agreed to accept smaller pension checks after the judge said they had no protection under the Michigan Constitution. Also, bond insurers with more than $1 billion in claims dropped their push to sell off art and settled for much less.
It took more than two years for a smaller city, Stockton, California, to get out of bankruptcy. San Bernardino, a California city even smaller than Stockton, is still operating under Chapter 9 protection more than two years after filing.
The most unusual feature of the plan is an $816 million pot of money funded by the state, foundations, philanthropists and the Detroit Institute of Arts. The money will forestall even deeper pension cuts and also avert the sale of city-owned art at the museum — a step the judge warned “would forfeit Detroit’s future.” … (more)
EDITOR: This is what should have happened with Harrisburg. Creditors will only accept a settlement for less than the face value of the debt when they are faced with losing much more in a bankruptcy court.
But Gov. Tom Corbett made certain that Harrisburg would not be able to find protection in federal bankruptcy and instead forced a settlement that will make pay off creditors 100% over time.
The result of the Corbett settlement is that Harrisburg garages now charge $3 an hours. Both customers and employees are leaving the city in droves. Who can afford to $27 a day, eight hours work and an hour coming and going? Who wants to spend $6 to $9 to patronize a restaurant or shopping? Not only won’t Harrisburg be able to pay their creditors but the downtown is on the way to ruin.
Only when creditors face a situation where bad loans lead to bit losses, as in Stockton, CA and Detroit, MI, will they take care to make sure that investments are sound.
Corbett spent records amount on his campaign. It will be interesting, to the extent the information is available, to see from where the funds came.
