Municipal Bankruptcy: Stockton, California

April 3rd, 2013 at 1:17:40 PM permalink
Fleastiff
Member since: Oct 27, 2012
Threads: 62
Posts: 7831
The judicial question is how much of the bullet must the city bite before it can make use of the bankruptcy courts to re-do its contracts and try to continue to survive its over spending in the past.

Creditors want massive cuts so that the citizens are paying whereas the city wants only minor cuts so that the bond holders bear the brunt of the losses.

The primary legal weapon is the "cram down" power to re-negotiate contracts. So a bankrupt city can alter the salaries, working rules and future pensions of its high paid workers: police, fire, hospital, school and library personnel.

The trouble is that cities listened to the "if it bleeds it leads" television news and went out and hired zillions of unneeded cops, paid them outrageous salaries, gave them great pensions .. and in general created an atmosphere wherein an unholy alliance was created between an organized segment of the electorate and those who benefited financially from the improper spending.

The "War on Crime" and "War on Drugs" and desire to criminalize all social problems so as to be able to build and fill jails lead to massive budget deficits ... yet the bankruptcy court is not holding accountable those that were unwise in their spending habits. The unholy alliance continues with certain of its factions "muddied" by the court but not held accountable.

This was an opportunity for the court to impose logic and restraint and to hold the voters to the consequences of their actions.