Friday, October 25, 2013

Detroit City Council Sends Resolution to Bankruptcy Judge Rejecting Swap Deals

Detroit City Council Sends Resolution to Bankruptcy Court Rejecting Swaps

PANW Editor: This article below does not mention the resolution passed by the Detroit City Council on October 25, 2013 rejecting the entire premise behind the deal to pay off the usurious interest rate swaps keeping them out of the bankruptcy. Emergency management Kevyn Orr, an agent of the racist Gov. Rick Snyder and the banks they work for, proposed that UBS and Bank of America be paid hundreds of millions of public dollars after they had rigged interest rates going back to 2005.

Such a citation would raise the question as to who is really responsible for the economic crisis in Detroit and around the country. Over a thousand people surrounded the federal courthouse on Wednesday October 23 demanding the preservation of pensions, healthcare, jobs, city services and assets.

On Monday the Detroit City Council voted unanimously to reject an onerous deal offered by Barclays bank, a major player in the Libor interest-rigging scandal of 2012. Such a deal would have trapped the city in years of additional underdevelopment and immiseration of the population.

The banks targeted Detroit and other communities across the United States with predatory lending. Then later with disadvantageous loans and bond issues in public finance.

These deals were designed to fail for the city but established to reap enormous profits for the rich. The only solution to the crisis in Detroit and other cities is to cancel the debt.

A City of Detroit retiree and activist with the Stop the Theft of Our Pensions Committee who attended and spoke at the City Council meeting on Friday October 25, sent the following observation to the Pan-African News Wire.

The retiree said that: "Preliminary to the resolution, Council member Watson distributed a Bloomberg article from Aug. 2, "Swaps probe finds banks rigged rate at expense of retirees."

"She also reprinted the letter from retirees about SEC and the two attachments I included about the Chase and BoA decisions."

This same observer went on to bring attention to the way in which corporate media and public radio, which echoes the bank-controlled press, have been spinning developments around the struggle against austerity and gubernatorial dictatorship, noting that "It is being reported in a distorted way on Michigan Radio. I don't know if it is a trend or a line. Because they refused the alternative, it is implied that they supported the Barclays deal -- although it is not so."

The aim of the financial institutions and their operatives in government and media is to make it appear as if there are no alternatives other than paying the banks who have brought financial ruin to Michigan cities. By paying the banks whatever they say is owed to them at the expense of the well-being of 700,000 residents and tens of thousands of employees and retirees, the city will surely never recover from the Wall Street imposed disaster.

What needs to be prioritized is the maintenance of jobs, salaries, benefits and municipal services and resources. A line must be drawn and the banks and corporations must be challenged in all efforts to rebuild the cities.

Abayomi Azikiwe

October 25, 2013 at 2:40 pm

Detroit council declines to offer alternative to $350M loan plan

Christine Ferretti
The Detroit News

Detroit— The City Council said Friday it will not offer a competing bankruptcy financing plan from an unnamed lender that initially asked for Detroit Institute of Arts artwork to be used as collateral.

The decision came after members this week unanimously voted to reject a $350 million loan from Barclays secured by Emergency Manger Kevyn Orr.They had until Monday to send a counterplan to the state’s Emergency Loan Board.

The alternative deal is “better than what was proposed (by Orr),” but is “still bad for the city,” President Saunteel Jenkins said.

The lack of a council alternative means the Barclays loan will move forward, since it is the only option the state loan board will consider. But U.S. Bankruptcy Judge Steven Rhodes, who is presiding over the city’s bankruptcy case, will ultimately decide the fate of the loan agreement.

At a special meeting Wednesday, the council said it was negotiating the terms of the counter offer brought by a national investment firm. Two firms were in the talks, but only one was an investment firm, Jenkins said. The other group is involved in the city’s bankruptcy, she said.

Jenkins said the initial loan proposal called for unspecified DIA art to be used as collateral. The firm then amended the request, asking instead for income and casino tax revenues — similar to the Barclays’ plan, she said.

“There was still some concern about the collateral that was being used in the alternative proposal,” Jenkins said. “We want to know this is in the best interest of the city. There were other long-term impacts that we didn’t feel confident would improve the city’s financial status.”

The council on Friday outlined its worries in a four-page resolution that’s being submitted to Rhodes. In the resolution, the council is expressing its disapproval of Orr’s proposed Barclays’ agreement and asking Rhodes to rule whether it’s permissible for the city to use casino taxes as collateral in this type of deal.

“The proposed Debtor-in-Possession Financing transaction is an extremely complex deal on a number of fronts that does not seem to be in the best interest of the city,” the resolution reads.

Under the state’s emergency manager law, the council was provided 10 days to accept or reject Orr’s contract with Barclays. The six-member panel then was given seven more days to present a competing plan to the loan board with the same or better financial impact.

Jenkins said the timetable in the law doesn’t allow for an informed decision.

“Experts couldn’t craft a deal like this in seven days,” Jenkins said.

The terms in the new offer were similar to Orr’s deal. The council was seeking a more favorable loan term, interest rates and default provisions, Jenkins has said.

The Barclays’ loan would be used to pay off pension-related debt and finance improvement of services while Detroit is in bankruptcy. Orr’s deal is expected to result in a lower interest rate for debt, free up casino revenue and cash to improve city services.

Jenkins added the council has “no concrete terms” on how the quality of life funds will be spent.
(313) 222-2069

From The Detroit News:

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