Judge Tells Detroit Not to Pay Banksters!
by Matt Stannard on January 20th, 2014

From the Detroit Free Press, somewhat shocking and hopeful news that U.S. Bankruptcy Judge Steven Rhodes has rebuked Emergency Manager Kevin Orr's plan to pay off the big banks whose misdealings have thrown Detroit into economic crisis. 

U.S. Bankruptcy Judge Steven Rhodes rejected the City of Detroit’s bid to pay off a disastrous debt deal from 2005, slamming a proposed $165-million settlement as too generous and cautioning the city to stop making irresponsible financial decisions.

Calling the original debt deal legally dubious, Rhodes said the city “likely” could challenge it successfully in court and pay substantially less. It was the second time Rhodes rejected a proposed settlement with UBS and Bank of America Merrill Lynch. The first was for about $230 million.

“The court ... will not participate in or permit the city to perpetuate the very kind of hasty and imprudent financial decision-making that led to the” original deal, Rhodes said Thursday from the bench. Rhodes said he “strongly encourages” the banks to renegotiate.

The settlement’s demise could trigger a high-stakes legal battle over the fate of the original deal, which involved a $1.4-billion loan and contracts called “swaps” that locked in interest rates at 6%. The ruling leaves in limbo the city’s casino tax revenue, which was pledged in 2009 as collateral for the growing debt as the city faced a $300-million to $400-million balloon payment.

The ruling was a stunning blow to UBS and Bank of America Merrill Lynch and a big win for the city’s residents, retirees and other financial creditors who want more money left to pay for city services and also to help pensioners and other creditors.

The Public Banking Institute will hold its annual conference in Detroit this June. PBI team members have been working with activists and citizens in Detroit to assemble a conference dedicated to exploring economic alternatives in order to preserve the autonomy of the city and build communities immune to the vampiric behavior of big private banks. PBI will have more details on the conference as planning contuinues to develop.

Posted in not categorized    Tagged with Detroit, Bankruptcy, New Economy


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