You may see this as a bad thing, but for too long different city governments have been growing their services too fast, based on growth expectations for tax revenues that were unrealistic. Bankruptcy is very important, it allows someone to readjust and work with the creditors on an agreement that is sustainable and gets the debt levels to a point that is manageable. If you do not take these steps and instead try and prop up a failing institution, it is a recipe for disaster. The pain they take now will make it for much less in the long run.
I applaud the leadership for actually stepping up to their responsibility and doing what is necessary, actually leading. This also gives them the opportunity to prioritize what services are most important and focus on making those programs work and either cut or work with local business to provide alternatives for other services people want but don’t need. The United States as a whole will be forced through this process I believe. Yes, it will be very tough but it needs to happen and I look forward to it because I know after it is over, we will be stronger for it. I joke and tell people that if elected President, I would be the only happy one-term President because I would go in and do all the unpopular work that has been put off and then get beat because it was unpopular. Atleast it would be done and I would explain the best I could on why I did it, just to make it harder for the “free lunch” candidate to sell them on cotton candy and unicorns.
LA Times - This Gold Rush-era port city, an epicenter of California’s agricultural exports, will become the nation’s largest city to seek protection under the U.S. bankruptcy code after its City Council on Tuesday stopped bond payments, slashed employee health and retirement benefits and adopted a day-to-day survival budget.
This is unfortunate events but in the end, these functions are beneficial. By taking the pain now and restructuring programs to meet the available funds for ongoing operations. We will and need to see much more of this so we can not have states running unsustainable budgets that they will not impose taxes and fees to cover.
Bloomberg - Providence Mayor Angel Taveras has put pressure on Brown University and other nonprofit organizations to help close a budget gap of at least $20 million, while Governor Lincoln Chafee is pressing lawmakers for action on measures to curb municipal pension costs. Unsustainable retiree expenses helped push Central Falls (1058MF) into insolvency. Moody’s Investors Service cut Providence debt a step to Baa1, third-lowest investment grade, this week citing its “strained” finances.
“Bankruptcy is not the preferred option for restoring Providence’s fiscal health; it is the last option, and I will do everything in my power to prevent it from happening,” Taveras said in a statement in response to a request for comment on Flanders’ remark. “I respectfully disagree with Judge Flanders that bankruptcy is unavoidable.”
What a misstep on the part of Sean Quinn. He should of never pledged his entire equity of the Quinn Group to the bank to acquire its shares. When you took the money from the bank and started buying, you basically locked yourself in at the prices you purchase shares at. If you don’t acquire the majority stake in the bank, you loaned capital is now at the mercy of the managers of the bank and their board. In this case, the fix was already baked in so it would not of mattered if he got control of the now failed firm. It is plain to see what happened next, the bank was leveraged up with toxic real estate assets and as those declines, the shares fell and the bank went under. Now Mr. Quinn owes a huge note to a failed bank for billions and he owns shares in a bank that is now insolvent.
This is what happens when we use so much leverage in the system. Companies and people can just explode and leave huge liabilities that hurt the employees and shareholders alike.
Forbes (Edwin Durgy) – Once Ireland’s richest man with a personal fortune of $6 billion, Sean Quinn applied for voluntary bankruptcy in Belfast this morning. Quinn owed an alleged $3.85 billion to Anglo Irish Bank’s successor institution, the Irish Bank Resolution Corporation, which he simply couldn’t repay.
This is a good sign if you really think about it. If Boise County has unsustainable debt levels then having them file for protection and re-negotiate with their creditors is the proper and legal remedy. What we don’t want to see is the federal government coming in and bailing these municipalities out and basically trying to have them support large budgets without the tax revenues to back it up. There are quite a few more on the east coast that are getting close to this point so we should hear something to this effect in the future. As a nation as a whole, we need to get all our spending back to a sustainable level so we honestly get our house in order and start reducing this historic public debt we have.
Idaho Statesman - In a move rare in the United States and perhaps unprecedented in Idaho, Boise County is filing for federal protection against a multimillion dollar judgment. “This was not our first option. This was our last option,” said Jamie Anderson, chairwoman of the three-member Boise County Board of Commissioners. “This protects us so we can continue to operate.” Chapter 9 protection, from a section of federal code expressly for financially distressed municipalities, means that creditors can’t collect while the county is developing a plan for reorganizing its debts.
This story almost passed by without me noticing it. It has been 2 years since we have had much news from the mono-line insurers. Looks like Ambac has missed some debt payments and this forced their hands into bankruptcy to try and re-negotiate with their creditors. This is going to affect the whole sector and we will likely see another insurer go under or some consolidation.
Forbes - Ambac Financial Group said late Monday it has filed for Chapter 11 bankruptcy, after failing to reach agreements with lenders on how to repay its debt. As of June 30, Ambac had $1.6 billion in debt outsanding.