As far back as April 10, 2010, we began to warn Americans that the banksters were moving on a plan to extract as much wealth as possible from our pockets. Back then we said that eventually these shysters would directly and boldly swipe retirement funds directly. Then as the months past, we saw first people stripped of the equity in their homes through the mortgage fraud, then we saw the truth that the so-called bank bailouts really cost us, the American taxpayers, in excess of $15 trillion. If that were not enough, the banks were then caught laundering drug money, they plead guilty to fixing interest rates through the Libor scandal and were also guilty of manipulating several commodities including oil, silver, gold, and food grains.
All along we said if there are no criminal sanctions, they would continue by going after sovereign funds and they did exactly that in the last 24 months. So many cities are on the verge of bankruptcy because they invested in the “junk” of these so-called big banks and funds. The truth is that our justice department refuses to bring criminal charges and the result has been the so-called “Big 6” that were too big to fail in 2008 have gotten 40% bigger. Now, right on cue, the last big pot of money is now going to be drained leaving hundreds of thousands American retirees without the retirement money they worked their whole lives for to ensure their retirement security.
As lawmakers in Springfield Illinois prepare to vote on a controversial pension reform plan, a federal bankruptcy court judge in Detroit issued a ruling that could have major consequences for government employees throughout the country. Dealing with numerous objections to the nation’s largest municipal bankruptcy, Judge Steven Rhodes ruled that pension debts were not given “extraordinary protection” under Michigan’s Constitution, and that pension plans could be reduced by a bankruptcy court.
The judge also ruled that Michigan’s emergency manager law, and its decision to allow the city to enter bankruptcy, were both proper under state law and the state constitution. The rulings clear the path for Detroit to enter bankruptcy, and also increase the likelihood that city pensions will be sharply cut as part of a restructuring plan for Detroit. You see, the retirees are “unsecured” debtors so they are last in line to be paid.
Like Illinois, Michigan has a provision in its state constitution that makes pensions enforceable contracts. Judge Rhodes ruled, however, that pension contracts, like most other contracts, can be modified in bankruptcy if doing so is needed to put the city on a sound financial footing. Detroit government workers unions had argued that pensions could not be amended. The judge rejected that argument, setting a precedent that is likely to apply in Illinois.
In addition to Illinois, more than 20 major cities are on the verge of bankruptcy. These cities have amassed $118 billion in unfunded healthcare liabilities. These are legal promises to pay healthcare benefits to municipal workers beyond the employee contributions to finance those funds. This is a giant fiscal sink hole — and because of defined benefit plans, the hole keeps getting deeper.
Detroit may be the largest city in American history to go bankrupt, but it is not alone. The city raced to the financial insolvency finish line before anyone else in its class. Keep an eye on “too big to fail” cities like Chicago, Philadelphia, and New York.
According to an analysis by the Manhattan Institute, several Chicago pension funds are in worse financial shape than the worker pensions in Detroit. One is only 25 percent funded, and where the other 75 percent of the money will come from is anyone’s guess. And there are about a dozen major California cities having systemic problems paying their bills.
This decision by Judge Rhodes also weakens the value of any “guarantee” of pension funding, as a bankruptcy court could still reduce benefits in the event of a state or local government bankruptcy. Using a more conservative method of accounting for financial gains in the marketplace, there is a $4.1 trillion gap between assets and liabilities — known as the “unfunded liability” — of all state-level pension systems in the United States, according to State Budget Solutions, a fiscally conservative think tank that deals with tax and spending issues at the state level. This action by Judge Rhodes is a very important ruling with major implications for any government agency that has unfunded pension liabilities. The effect this will have on Illinois and other states and cities is likely to be profound, but could be complicated. With so much at stake, all parties that have an interest in pension reform – lawmakers, government workers and unions – would be well advised to put a vote on pension reform on hold long enough to work through Judge Rhodes’ ruling to understand how it will apply in each case. They should come back with a better plan that makes retirements more secure.
One thing is clear: Pension “guarantees” are not unbreakable. The need for real pension reform that gives workers more control over their own retirement funds is even greater now.
We have watched this methodically unfold in Greece, Spain, Ireland and now the grand daddy jackpot for the banksters, US municipal and state retirement funds. We are absolutely dumbfounded as to what it is going to take to get people to wake up, clean up our legislators, and jail these mobsters. Really are we that much sheeple that we will go apathetically and quietly to slaughter? These politicians and mobsters are banking on it, no pun intended.