Amazing possibility: Plans being drawn up to let states declare bankruptcy

[dud]

http://www.msnbc.msn.com/id/41188877/ns/business-the_new_york_times

"Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.

Unlike cities, the states are barred from seeking protection in federal bankruptcy court. Any effort to change that status would have to clear high constitutional hurdles because the states are considered sovereign.

But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid."









The futures of many are (possibly) on the line.

 

[rudeguy]

this is not good...

 

[boomhower]

Bad bad things are going to happen. They need to do it the old fashioned way. Rein in spending and raise income. Yes, cut jobs and services and raise taxes. Cutting of the government teet so many suck on would free up a ton of cash. I cringe every time I have to go to social services. Absolutely ridiculous.

 

[waggy]

whao. shens not going to happen. the effects of that are bad if it does.

 

[ThatsABigOne]

I hope that happens. It will teach all politicians to stop making too many promises.

 

[rcpratt]

If this happens, I give up on this country.

 

[PingSpike]

I hope that happens. It will teach all politicians to stop making too many promises.

LOL, no it won't.

 

[Fingolfin269]

Wow. Hide your kids, hide your wife...and hide your husband...

 

[Sho'Nuff]

What. The. Hell. How goddamn hard is it for lawmakers to understand that you can't spend what you do not earn?

Want to improve roads? PAY FOR IT!

Want to build a bridge? PAY FOR IT!

Want welfare and social programs? PAY FOR THEM!

For some reason, the above concepts are earthshattering breakthroughs that politicians just can't seem to get their wee brains around.

Seriously, this incessant government borrowing has got to f'ing stop. And giving the states an "out" by way of bankruptcy is a horrific idea. Want to see bad times? Just wait until your state files bankruptcy and its bond rating goes into the shitter. Maybe then, when massive RIF's are REQUIRED because the state can't borrow the money to pay for its workforce, will the pencil pushers in charge understand the Rolling Stones rule of personal and public finance, i.e., "you can't always get what you want."

Seriously, it is not rocket science.

 

[kranky]

Too many years of living beyond our means will make this step necessary. States can't simply print more money like the US Government can, and they don't have enough money. The debt problems are so large for many states that no level of cutbacks can make enough of a difference. A lot of people are going to get hurt, and that's unfortunate.

A guy I know took a public relations job with a public transit agency when he graduated college. He retired at age 52 with a $50,000/year pension and full medical for life - and Social Security on top of that! With people living into their 80's and 90's, that kind of retirement benefit is simply not sustainable. If he lives to be 83, he will have collected a pension for more years than he worked.

 

[2Xtreme21]

Doesn't bankruptcy mean they're just taken to court and an independent arbitrator draws up a repayment plan? Doesn't seem world-ending to me...

 

[KB]

I hope that happens. It will teach all politicians to stop making too many promises.

It will only increase the spending and promises. Why reign in spending when you can just bankrupt it away. Each new governor's term will start with a bankruptcy in order to get rid of the huge debt the previous governor left. Loans to states would have an interest rate of 50% and they would be unable to fund any future projects. This is very bad.

 

[nick1985]

http://www.msnbc.msn.com/id/41188877/ns/business-the_new_york_times

"Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout.

Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors"


wow. Not sure what I would do if I was one of those retirees. I imagine people wont take this one peacefully.


Hell, even the public employee unions are going nuts:

“They are readying a massive assault on us,” said Charles M. Loveless, legislative director of the American Federation of State, County and Municipal Employees. “We’re taking this very seriously.”

 

[matt0611]

Nice, glad I don't own any muni bonds...

 

[Sho'Nuff]

Doesn't bankruptcy mean they're just taken to court and an independent arbitrator draws up a repayment plan? Doesn't seem world-ending to me...

There are multiple types of bankruptcy. Many involve some relief or recusal from the obligation to repay certain creditors.

So yes, state bankruptcy is a big F'ing deal.

 

[nick1985]

Nice, glad I don't own any muni bonds...

Same.

 

[K1052]

Nice, glad I don't own any muni bonds...

Muni and state bonds would be the two things that would definitely not get sunk in a bankruptcy. The states and cities know full well they'll have to go to the markets again for bond sales after the process is done.

The existing pensions are where the really huge liabilities are and that's what the states want to reduce, without doing a constitutional amendment in said state.

 

[nick1985]

Muni and state bonds would be the two things that would definitely not get sunk in a bankruptcy.

Its certainly possible. To think otherwise is naive

 

[bignateyk]

This country would be so much better if we could have a libertarian like Ron Paul become a dictator for 4 years, clean the whole mess up, and then give it back to the republicans and democrats to fuck everything up all over again from a clean slate.

 

[bruceb]

This was in the NY Times this morning as well. It would be good in order to reign in these out of control pensions and health care costs. I would have to sell any municipal bonds so I don't lose out on them.

 

[K1052]

Its certainly possible. To think otherwise is naive

The states won't want to hugely increase their borrowing costs or the marketability of their bonds. Wiping out the bondholders would do both of those things, probably forever.

 

[rudeguy]

This was in the NY Times this morning as well. It would be good in order to reign in these out of control pensions and health care costs. I would have to sell any municipal bonds so I don't lose out on them.

Really? Really?

It would be good in order to reign in these out of control pensions and health care costs.

ok..I guess that is good. But what about the people who are depending on that health care and those pensions that they were promised?

I would have to sell any municipal bonds so I don't lose out on them.

There we go. No I get it. Its ok for people to get screwed out of their health, home and livelihood as long is it doesn't ding your account.

Dick

 

[Jeeebus]

This would give me a substantial uptick in bankruptcy litigation business.

I've already been responsible for axing a few thousand auto workers' pensions and retirement benefits... why not a few million state employees to add to my evil deeds?

 

[jacc1234]

P&N?

 

[surfsatwerk]

P&N?

This

Srsly drag this shit back to the pit of hell that spawned it.