An article in Pennlive.com is headed “Overhaul of distressed municipality program passes Pa. House.”
We question whether Act 47 isn’t totally wrongheaded, aimed at protecting creditors of municipalities and giving making it virtually impossible for municipalities and especially authorities to seek protection under the Federal Bankruptcy Act.
Were it not for Act 47 the Lancaster County Convention Center Authority could have used the threat of Chapter 9 of the Federal Bankruptcy Act to reorganize its one sided contracts with Penn Square Partners and to have ‘crammed down’ interest rates and possibly principal owed on its bonds, owned by Wells-Fargo Bank.
The financing of the Convention Center was totally irresponsible, and Wachovia darn well knew it at the time. Wilkes-Fargo acquired Wachovia in what was a ‘shot gun marriage’ during the 2008 melt down of the economy.
According to the article:
“A bill designed to move distressed Pennsylvania municipalities through the Act 47 process — something that almost never happens now — passed the House Tuesday. Under the bill, a cash strapped municipality would be allowed to spend at most eight years in Act 47.
“Ideally, a municipality would move through Act 47 in five years. At the end of that time, the Act 47 coordinator would have to submit a report recommending a course of action for a municipality. That could be exiting Act 47 within another three years, requesting fiscal emergency status or disincorporating the municipality.
“The idea behind the bill is to force municipalities to make the hard choices to restructure their costs, instead of lingering in Act 47, and using added taxing powers as a crutch indefinitely without fixing long-term structural issues.”
We believe that so long as municipalities and authorities are hampered in seeking bankruptcy relief, lenders will continue to fund every last bond request with confidence that they will be repaid either through the added taxes of local taxpayers or through a State bail out, which simply spreads the ‘blood letting’.
Let lenders evaluate municipal and authority bonds as they do corporate bonds. When they decline to fund or push up the interest rates, governments will avoid imprudent borrowing.
Our Legislators would never do that, Big Finance owns this country. It’s the same reason the big banks were bailed out by the federal government. We have become a Plutocracy that promotes crony capitalism.
Wells Fargo was a very healthy bank. Its acquisition of Wachovia was not a shotgun marriage.
EDITOR: “Shotgun” in the sense that the Federal Reserve Bank pressured the relatively healthy Wells-Fargo to acquire the failing Wachovia.
Did they? Are you sure you’re not thinking of Bear Stearns, Merrill Lynch, or Washington Mutual?