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U. S. Path Is Sought For States To Escape Debt Burdens

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http://www.nytimes.com/2011/01/21/business/economy/21bankruptcy.html?hp

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.

Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides.

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.

“All of a sudden, there’s a whole new risk factor,” said Paul S. Maco, a partner at the firm Vinson & Elkins who was head of the Securities and Exchange Commission’s Office of Municipal Securities during the Clinton administration.

For now, the fear of destabilizing the municipal bond market with the words “state bankruptcy” has proponents in Congress going about their work on tiptoe. No draft bill is in circulation yet, and no member of Congress has come forward as a sponsor, although Senator John Cornyn, a Texas Republican, asked the Federal Reserve chairman, Ben S. Bernanke, about the possiblity in a hearing this month.

So it appears they are going to rewrite the rules, they should never have made the promises in the first place.

Work until dead that will be what awaits the majority of us.

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They're suggesting bankruptcy. They can't afford to pay, so what's the problem with forcing the creditors into a deal?

That's the point. I am sure it will create the perfect precedent for the major sovereing bond holders to take a hair cut, together with the pensioners.

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Boy, are there going to be a lot of angry gun owners in the US or what?

Correct.

US state can't default on pension liabilities.

The only way to do it results in full martial law.

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They're suggesting bankruptcy. They can't afford to pay, so what's the problem with forcing the creditors into a deal?

It's what Injin said a while ago... if you suddenly change the rules so that one group suddenly lose a huge amount through no fault of their own... then how do you get them back to work in the future? It's like paying into a pension fund for years, just before you retire they say you can't have it. It makes those who are still working think hold on if they can do this to them....

As one change in the rules means that another change is almost certain.

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US state can't default on pension liabilities.

The only way to do it results in full martial law.

Oh they can...... the USA has been defaulting since 1971.. they default via the printing presses, so that the pensioners still get their contractual amount of dollars. It's just their dollars buy a whole lot less..... its funny how we talk about this, back in 1996 my £2.20 Mc'ds wage feels like it buys more than a fiver today :blink:

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One of America's great strengths is its bankruptcy laws. Which allow for an orderly default on liabilities, without wrecking the integrity of the organization defaulting. Hence how General Motors is back as a fierce competitor in autos.

The Vallejo California bankruptcy was historic and looks to me like it will be used as the precedence for the coming wave of municipal bankruptcies and state bankruptcies. In fact likely most cities and states will go bankrupt over the next 10 years.

The judge in the case ruled that Vallejo has a duty to provide basic services to its citizens and only after that is properly paid for will remaining monies be split between the creditors. Which he ruled a default on the pensions and for the bondholders they are likely to get between 5 and 20 cents on the dollar.

States and municipalities are notgoing to be forced to cut services to nothing while still paying pensions and bondholders. Instead when they can no longer comfortably afford to pay both, the court system is going to let them legally default on their debts.

This is going to make a stronger and healthier America, instead of going down a downward spiral.. but obviously pensions and bondholders are ---cked.

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Funny how everything in the known universe is apparently up for grabs except bankers contractual arrangements that exhibit a cockroach like ability to survive complete financial armageddon and state ownership in all but name. :lol:

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States and municipalities are notgoing to be forced to cut services to nothing while still paying pensions and bondholders. Instead when they can no longer comfortably afford to pay both, the court system is going to let them legally default on their debts.
If you tell all those who provided the services for the last 30 years that you don't plan to pay them for all their work, how do you plan to get the next group of service providers to provide the services. At a minimum they re going to demand a shed load more money so they can make their OWN pension provisions.
This is going to make a stronger and healthier America, instead of going down a downward spiral.. but obviously pensions and bondholders are ---cked.
No it's going to see the US become a full on dictatorship. That's the only way they will be able to stop a full-on armed uprising... their population is heavily armed, particularly the older generation. Telling them to go f*ck themselves means you have to disarm them by force or face abullet in the face.

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If you tell all those who provided the services for the last 30 years that you don't plan to pay them for all their work, how do you plan to get the next group of service providers to provide the services. At a minimum they re going to demand a shed load more money so they can make their OWN pension provisions.

There are no jobs around so people will gladly work for say 2/3rds the salary that current government workers make plus no benefits. Look corporations are already hiring young workers with the 'defined contribution' pensions. Almost no one besides the banks has defined benefit plans.

Honestly a lesson Iearned in life at a young age is when someone promises you a lot, a long time from now, it won't be there. We know that is going to be true with the pensions too, the money is already long spent.

No it's going to see the US become a full on dictatorship. That's the only way they will be able to stop a full-on armed uprising... their population is heavily armed, particularly the older generation. Telling them to go f*ck themselves means you have to disarm them by force or face abullet in the face.

Someone once said; the USA is a bad moustache away from being a dictatorship.

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Funny how everything in the known universe is apparently up for grabs except bankers contractual arrangements that exhibit a cockroach like ability to survive complete financial armageddon and state ownership in all but name. :lol:

:lol:

BUT THE BONUS WAS GUARANTEED!!! :rolleyes:

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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