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ABOVE: VIDEO OF DETROIT EFM VULTURE KEVYN ORR’S INTERVIEW WITH FREEP: EVERYTHING ON TABLE, LET’S PICK DETROIT’S BONES DRY.

Kevyn Orr: “Everything is on the table.”

Orr raises issues from “Root Cause Committee” report

Report falsified facts on other cities’ water/sewerage “authorities” 

By Diane Bukowski with Tia Lebherz

March 19, 2013

 DETROIT – “I think I’ve said everything’s on the table,” Detroit Emergency Financial Manager Kevin Orr told a Detroit Free Press editorial panel in the video above. “My operating assumption is there a net benefit to city and its residents. Water and Sewer for instance enjoys a higher bond rating than the city, operates on its own, has a positive net cash level, and provides services in a relatively good level. But if you’re able to do a structure with either a regional authority or privatization, it flows cash positive to city, $50 million with a 10 percent cap rate, half a million dollars. Everything—leasing, sale/leaseback, privatization, 99-year leases with a reversion to the city—everything’s on the table.” 

BOWC chair James Fausone and Oakland Co. rep. J. Bryant Williams appear to be deeply studying RCC report at meeting March 13, 2013. They couldn’t have studied TOO hard, as blatant falsehoods were rampant in report..

Orr thus has clearly studied a so-called “Root Cause Committee” report which the Detroit Board of Water Commissioners,  (BOWC), voted 6-0 March 13 to approve in concept. BOWC Oakland County Commissioner The report recommended that the entire Detroit Water and Sewerage Department (DWSD) operate as an independent, autonomous public authority under the supervision of the BOWC, in exchange for an annual payment to the General Fund of $50 million.   It cited fear of a takeover or bankruptcy under Orr’s governance.  (Click on RCC report for whole report.) 

Under the proposed structure, Detroit’s City Council would no longer have approval rights over contracts and rates. Currently, the City Council must approve all DWSD contracts over $2 million as well as rate hikes. The people of Detroit would lose their Charter-mandated right to vote on any sale or transfer of DWSD assets.

Tia Lebherz of Food and Water Watch.

 Tia Lebherz of Food and Water Watch told the BOWC her organization is opposed to the plan. 

“This is a bad proposal, not in the best interests of the City of Detroit, and a path to privatization,” Lebherz said. “The Board of Water Commissioners is appointed and not accountable to the people. This will eliminate democratic control of our water resources. The Board has already voted to approve a $47 million contract with EMA, which proposes to cut 81 percent of the DWSD workforce. We need an elected and accountable water board.” 

DWSD COO Matthew Schenk told the BOWC that the separation, which he termed a “lease,” would last for at least 30 years, depending on the pay-off of $6 billion in outstanding DWSD debt, and longer if more bonds are floated.  After Oakland County’s BOWC member J. Bryan Williams objected that a proposed $50 million annual pay-off to Detroit’s general fund in exchange for DWSD, which has assets of over $6 billion, might not be affordable, Schenk the number is negotiable.

 “The terms of any lease agreement are important,” BOWC board member Linda Forte, representing Detroit, countered. “We want total control of DWSD again. This is temporary…we should not be locked in.” 

BOWC Detroit rep. Mary Blackmon at meeting March 13, 2013.

However, she voted “Yes,” as did Detroit’s other representatives Mary Blackmon and James Thrower, apparently not having reviewed the report for accuracy. 

The report flagrantly falsified information about what it claims are six successful authorities in other cities. No one from the Root Cause committee, which unanimously approved the report (meaning City Council Pres. Charles Pugh and Pro-Tem Gary Brown signed on), the BOWC, the DWSD administration, or U.S. District Judge Sean Cox’s court apparently bothered to screen the document for factuality. 

It is unclear if the report has even been presented to Cox, who appointed the Root Cause Committee. It is not posted on the federal court website, where previous Root Cause reports have been posted. It is unclear also whether Orr has any authority to act independently of Cox as a federal district judge. 

U.S. District Court Judge Sean Cox.

The report and a separate Compliance Report issued by DWSD Director Sue McCormick recommend that federal oversight of DWSD be ended, after 36 years. It ignores the fact that litigation is still outstanding under the 1977 case from water department unions. AFSCME Local 207 and others challenged earlier orders from Cox changing DWSD governance and union rights before the U.S. Sixth Circuit Court of Appeals. The court has not yet rendered a decision. 

Recommendations and conclusions in the entire report are suspect, if one examines blatant falsehoods it puts forward regarding other municipalities, which it claims have water and sewerage departments run successfully by “authorities.” 

NEW YORK CITY 

The report says, “The New York Municipal Water Authority was established by state law as a separate authority from the City of New York to manage the water and wastewater services for area residents. The Authority has a seven member board comprised of 4 ex officio New York City Directors, two mayoral appointments, and one gubernatorial appointment. The Authority holds the assets of the system pursuant to a lease agreement with the City and makes annual lease payments into the City’s general fund based upon a capped formula tied to total indebtedness.” 

NYC water workers at site of water main break.

In fact, there is NO “New York Municipal Water Authority.”  

According to New York City’s website and other sources, there is a “New York City Municipal Water FINANCE Authority.” Its sole purpose as a public benefit corporation established in 1985 is to finance the capital needs of the system through the issuance of bonds and other instruments. 

It does NOT manage water and wastewater services. That is the responsibility of the New York City Department of Environmental Protection, which has 5,600 workers and is listed on the NYC government website as a regular city department. It is comprised of the Bureau of Water Supply, the Bureau of Water and Sewer Operations, and the Bureau of Wastewater Treatment.  Its employees are regular city workers, represented in part by AFSCME District Council 37, among other public service sector unions.

A third entity, The New York City Water Board, sets water and sewer rates and collects payments from customers for services provided by the NYCEP.  It has five board members appointed to two-year terms by the Mayor of New York City.

CLEVELAND, OHIO

The report says, “The Northeast Ohio Regional Sewer District (“NEORSD”) was created by order of District Court Judge George McMonagle in April, 1972 in response to a lawsuit involving violations of the Clean Water Act. Prior to the Court’s involvement, the Sewer District was owned and operated by the City of Cleveland and served multiple jurisidictions . . .Through the litigation, Judge McMonagle ordered the transfer of assets by the City to a newly created public authority in Ohio.”

So far, so good. But sewage is sewage and water is water. The report completely neglects to cite the fact that Cleveland’s water supply services are provided by the City of Cleveland Public Utilities Department and its city workers, who are also unionized under AFSCME Local 100 and other labor organizations. Sewerage work is also included.

According to the city’s website, the Public Utilities department includes:

The city’s website says the city’s public governance of water and sewerage began in 1840.

LANSING BOARD OF WATER AND LIGHT

The RCC report says, “In Lansing, the Board members are appointed by the Mayor with Council ratification. The Board has full and final authority over all matters affecting the operation of the utility including contracting, rate setting, capital planning, hiring a Director, etc.”

It says that the Lansing entity pays the city a total of five percent of sales according to a current five-year agreement.

The website for the Lansing BWL says however, “As a public power utility the Board of Water & Light is owned by its customers. While many utilities are investor-owned and managed to deliver profits into the pockets of stockholders, the BWL is managed to return value and benefits to the people it serves. 

Lansing’s Board of Water and Light also provides electricity for Lansing residents at far cheaper rates than private utilities. While the BOWC is at it, if Detroit is going to emulate Lansing, why not have a public takeover of DTE and Consumers Power?

The City of Lansing website adds that sewerage services are provided through the city’s Public Service Department, using city workers.

City of Lansing Wasterwater Treatment Plant.

“Wastewater Division is responsible for collection, pumping, processing and treatment of the city’s wastewater, and compliance with State pollution control regulations and the National Pollutants Discharge Elimination System (NPDES) program,” says the site.  “This division, in conjunction with the Engineering Division, is also responsible for monitoring the Combined Sewer Overflow (CSO) systems. The city’s Wastewater Treatment Plant (WWTP) is the largest WWTP in the region with a current capacity of treating up to 50 million gallons of wastewater per day.

“The City operates the treatment facility under a National Pollution Discharge Elimination System permit issued by the Environmental Protection Agency and Michigan Department of Environmental Quality. The government has mandated that we treat the wastewater to specified levels of metals, nutrients, and chemicals before discharge to the Grand River.” 

So much for speaking truth about power in Lansing. 

LOUISVILLE WATER 

Louisvile Water Company facility.

Perhaps the most blatant falsehood put forward by the RCC involves its description of Louisville, Kentucky’s system which is in fact totally publicly owned and controlled by the city government. (VOD had to check to see if there is any other Louisville in the U.S., we were so astonished at the different versions presented. There is not.) 

The RCC claims, “In Louisville, the Louisville Metro Mayor appoints all Board members and serves as an ex officio member. . . .The Board has total autonomy to make all decisions impacting operation of the utility with no other governmental oversight from the Metro Government. Annually, the utility pays a return on equity or dividend to its shareholder (Louisville.)” 

Boy gets drink from Louisville Water Co. cooler.

The report says Louisville’s water system paid a total of $32.6 million to Louisville Metro. 

Again, let’s take a look at Louisville’s website. LouisvilleWater.com is listed as a regular city department on Louisville’s government site.

“Louisville Water Company was incorporated in 1854,” says the government website.  “On March 6, 1906, Kentucky State Legislature enacted legislation that called for the City of Louisville to become the sole stockholder of the company — at the time only 51 shares had remained in private hands. The act replaced the Board of Directors with the Board of Water Works and allowed the mayor to appoint four members, subject to approval by the aldermen. The act also stipulated that free water would be provided to the city and the company would become tax-exempt. The city would not be responsible for the company’s debt and all improvements had to be financed from income.” 

The RCC took care to point out in its report that Michigan state law does not allow the free provision of water to anyone, but did not cite WHICH Michigan statute. 

A report from the University of Louisiana says, “Louisville Water Company and American Federation of State, County and Municipal Employees Local 1683 have claimed the 13th annual labor-management award from the University of Louisville Labor-Management Center.  . . . .Water company union and management leaders were praised for working together to improve quality and operations. As a result, water-related customer complaints have dropped by half and employee suggestions have saved the water company millions of dollars, award judges said.” 

So—unionized Louisville city employees run the Louisville Water Company, in total contradiction to the implications made by the RCC.

WASHINGTON, DC WATER 

Parents and children protest lead contamination in DC Water in 2004.

“DC Water was created as an independent authority pursuant to a statute enacted in 1996,” says the RCC. “Under that framework, there is an independent board of directors created that has autonomy over all operations of DC water with very limited exceptions. The 11 member board is appointed by the Mayor . . The Board must receive Mayoral and District Council approval for any sale of a plant facility or any privatization of the entire plant operations. Also, DC retains all access rights to the waterfront on all DC Water property.”

It says DC Water makes an annual payment to the city of Washington, D.C. of about $25 million a year under terms of a five-year Memorandum of Understanding, and that all assets are held by DC Water until all revenue bonds are repaid.

The report neglects to mention that Washington, D.C. does not have home rule. DC water was created in 1996 by both the city and the U.S. federal government.  

Not long afterwards, DC Water became the focus a a huge scandal involving lead contamination of its water supply. 

Marc Edwards in Washington Post article on his battle against lead contamination of DC Water supply.

In 2001, Marc Edwards, a civil engineering professor at Virginia Tech, found that DC water contained lead levels 83 times higher than safely acceptable. The national Centers for Disease Control and Prevention (CDC) claimed the water was nonetheless safe. But a Congressional investigation prompted by articles in the Washington Post found that the CDC had made “scientifically indefensible” claims about health effects from the lead. 

Edwards found that the use of chloramine instead of chlorine to treat the water was responsible, with chloramine picking up lead from pipes and solder and dissolving it into the water. Lead is a serious health hazard, particularly in children, where it can cause brain damage, learning disabilities, tendencies to violence, and other adverse effects. 

In 2010, the CDC reported that 15,000 DC area homes might still have water supplies with dangerous levels of lead.

 So one would think that DC Water no longer uses chloramine. But an article in the Dcist Daily this month asks, “Does your tap water smell like a swimming pool?” It explains that one month a year, DC Water cleans out its pipes using chlorine, but continues to use chloramine the rest of the year. 

In an email, Prof. Edwards confirmed that is the case. 

“The lead pipes are still there, and still cause lead to be higher than the EPA LCR, but not in more than 10 percent of the homes,” Edwards said. “So officially they meet the action level. They started to dose orthophosphate in 2004, which seems to have helped keep the lead on the pipes. DC WASA was a horrible disaster of a utility through 2004, and probably through at least 2010 when their manager (Jerry Johnson) was fired and a new guy was hired. Three whistleblowers were fired for reporting safety problems from 2001-2004, and two won lawsuits against the utility, after years of consumers drinking water laced with high lead.” 

So much for autonomous, independent control of a basic need of human life. And so much for the 10 percent of DC households whose children still drink lead-contaminated water. 

INDIANAPOLIS 

The RCC report says, “Indianapolis sold its public utility groups to Citizens Energy Group in 2011. CEG holds the assets as a not-for-profit public trust and is managed by a private board of directors.  .  . that nominates its own successors who shall be confirmed by the Mayor.  .  . The sale of the water and wastewater services to CEG by the City of Indianapolis included CEG assuming $1.5 billion of current indebtedness for a total price of approximately $1.9 billion, netting the City of Indianapolis $425 million to fund general fund expenses.”

 The RCC did not report the real history of Indianapolis’ water system, which has been a rocky road indeed. 

Detroiters rally against water privatization.

According to a study on water privatization, “Indianapolis purchased its water utility from the [private] Indianapolis Water Company in 2002 and immediately privatized the operation of the system. Veolia received the 20-year, $1.5 billion deal to manage the city’s water system. This had been Veolia’s largest water contract in the United States.

“Since then, workers, consumers and government officials alike have all had problems:

• Employees claimed the company cut their benefits by more than $50 million.
• Residents accused the company of using unfair billing practices and overcharging them.
• More than one million people were put on a boil alert in 2005 after a company employee entered a wrong code into a computer. This meant that before water could be safely used, it needed to be boiled. As a result, schools and businesses shut down and hotels and restaurants were forced to serve only bottled water.
• A city councilmember criticized the company for cutting back on staffing, water testing, treatment chemicals and maintenance, and other members questioned whether the company had a financial incentive to fudge quality tests.

“ . . . .A controversial contract amendment signed in 2007 shifted millions of dollars in liabilities from the company to the city while increasing city’s annual payment to the company by $1.9 million. In total, the amendment cost the city more than $144 million. State regulators refused to allow the city to recoup some of these additional expenses in a rate increase.

“By 2010, with infrastructure needs mounting, the city opted to wash its hands of the water utility altogether and decided to sell it, along with the sewer system, to the nonprofit Citizens Energy Group. As part of the transfer, the city agreed to pay Veolia $29 million to terminate its contract early. Citizens Energy believed it could realize savings not possible within the constraints of the contract.

So, Indianapolis Water and Sewerage was publicly controlled for only a brief period of time, and its subsequent privatization of the system resulted in disaster for the city.

So much for Kevyn Orr’s alternative of privatization for DWSD.

Orr, the BOWC, the RCC, the DWSD administration, Mayor Dave Bing, Governor Rick Snyder and their corporate/banker backers need to be charged with fraud and obstruction of justice for perpetrating this flagrant hoax on the people of the City of Detroit, not to mention a federal judge. 

Kevyn Orr (r) addresses media at press conference March 14, 2013. Detroit Mayor Dave Bing and Michigan Gov. Rick Snyder (l to center) listen attentively.

By Abayomi Azikiwe

March 19, 2013

Michigan’s multimillionaire Gov. Rick Snyder on March 14 appointed Washington lawyer Kevyn Orr as “emergency manager” over the city of Detroit. This has become the latest majority African-American municipality in Michigan to fall under the dictatorship of the state, which is serving as an agent of the banks. The banks claim the people owe them approximately $16.9 billion in long-term debt.

The Detroit City Council filed an unsuccessful appeal on March 12 against the state takeover, but Snyder went ahead with the seizure just two days later.

Two of the many demonstrators who picketed the EM press conference March 14, 2013.

As Snyder introduced Orr at a press conference at the state office building in the New Center area, demonstrators picketed outside. They condemned the governor’s act of dictatorship and total abrogation of the democratic rights of voters, who just in November had voted down the emergency manager law in a statewide ballot initiative.

Orr, who was involved in the Chrysler bankruptcy restructuring in 2009, immediately warned the city unions that they would be a target of his efforts. “Don’t make me go to the bankruptcy court. You won’t enjoy it,” he said at the press conference. (miamiherald.com, March 15)

Autoworkers and supporters picket Detroit auto show Jan. 13, 2013.

“Bankruptcy’s been my stock and trade,” Orr stated. “I’m very comfortable in bankruptcy courts. You can do everything by consent. … When I say consensual, I mean … let’s get at it and work together because we can resolve this.”

The bankruptcy of Chrysler led to massive layoffs of tens of thousands of workers, freezing wages and institution of a two-tier wage structure. Before that, Orr worked for the international Jones Day law firm which specializes in “turnarounds” for private corporations.

DWSD workers on strike at Wastewater Treatment Plant Sept. 30, 2012.

Detroit city workers have already been forced to take up to 20 percent pay cuts and see the erosion of their health care and pension benefits. Since corporate-oriented Mayor Dave Bing took office in 2009, some 4,000 city jobs have been eliminated.

The city is facing a monumental economic crisis. Public transportation is in an abysmal state, lighting is out in large sections of the city, and streets are in gross disrepair.

The emergency manager’s main role, however, is to guarantee that debt service is paid to the banks. All existing labor contracts and other measures can be thrown out based upon the interests of capital.

‘Make the banks pay!’

Jerry Goldberg speaks at rally to save Jennifer Britt’s home, by Moratorium NOW! coaltion and others.

Jerry Goldberg, of the Moratorium NOW! Coalition to Stop Foreclosures, Evictions and Utility Shutoffs, spoke to the protesters at the press conference on March 14. Goldberg, who said the appointment of Orr is designed to enrich the financial institutions, was met with great applause and people chanting “Make the banks pay!”

In response to the declaration of a “financial emergency” by Snyder on March 1, the Moratorium NOW! Coalition issued a statement pointing out that the banks and corporations are responsible for the city’s economic and political crisis. The statement was widely circulated online and prompted Bloomberg News to interview coalition leader and retired Detroit city worker David Sole.

Typical scene in Detroit neighborhoods as a result of banks’ criminal practices.

The Moratorium NOW! statement read in part: “Snyder along with the corporate media is blaming the people of Detroit for their current plight, yet the situation … in the city is a direct result of racist and exploitative practices of the financial institutions and the corporations. Over the last decade more than 237,000 people were forced out of the city due to home foreclosures, utility shut-offs and the elimination of jobs.”

Read http://www.bloomberg.com/news/2013-03-14/only-wall-street-wins-in-detroit-crisis-reaping-474-million-fee.html

Regarding the debt, the statement continues: “Piled on top of this massive loss of employment and fraudulent mortgage lending, the city government was forced into credit default swaps (cds) and other questionable municipal loans which have rendered the people to indebtedness that can never be paid off. In addition, the bond rating agencies such as Moody’s, Standard & Poor’s and Fitch have continued to lower the creditworthiness of the city and [are] therefore driving up interest and penalties where the banks can now claim all tax revenues that should be utilized to pay for municipal services and education.”

Banks’ racism in action

Slavemaster Snyder goes after Black cities in Michigan.

The emergency manager imposition is also the denial of voting rights to nearly half of the African-American residents of Michigan, who live in cities under emergency management. The emergency manager, referred to by many as the “dictator law,” harkens back to the Jim Crow era. So too does the use of banks in targeting African-American households and communities as sources of avaricious profitmaking and usury.

The existing political structures in Detroit and other cities with majority African-American populations in Michigan are being strangled by the banks and corporations. The threat of bankruptcy by Orr and Snyder is designed to force even greater austerity measures upon the people of Detroit.

Protest against banks in downtown Detroit May 9, 2012.

The Moratorium NOW! Coalition calls for “an immediate halt to all debt-service payments to the banks which would immediately provide enough revenue to operate the city. The banks must then be held accountable for their robbery and consequent destruction of Detroit.”

The coalition also calls for “mass demonstrations, rallies, press conferences to protest and denounce the actions of Snyder and his collaborators. These protests should expose the criminal nature of the banks and the corporations who are at the root of the financial crisis in Detroit and throughout the state of Michigan.”

Meanwhile, the first batch of some 2,700 documents has been released by the city of Detroit as part of the Freedom of Information Act lawsuit filed by Moratorium NOW! in February. The organization is setting up a people’s review board to analyze the documents and expose that the existing crisis is the direct result of the banks’ usurious policies.

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Also see:

Detroit activists use lawsuit to demand: ‘Show us the debt!’

Detroit MLK Day focuses on defeating ‘right-to-work’ and police brutality

Michigan ‘emergency manager’ law defeated

Corporate-backed officials seek to subvert referendum on ‘dictator law’

Detroit financial crisis continues

VOD: THIS ARTICLE HAS BEEN RE-POSTED FROM “METROPOLITAN HISTORY” at http://metropolitanhistory.wordpress.com/. It is authored by Michan Connor independently of Voice of Detroit; only the photographs and video have been added by VOD. VOD was particularly impressed with this article due to the author’s sensitivity to the racial issues involved in the Detroit takeover. We recommend you visit this website for other articles. VOD has provided a link on the right to facilitate this.

by Michan Connor

March 17, 2013

Michigan Gov. Rick Snyder, flanked by Detroit Mayor Dave Bing (l) and new EFM Kevyn Orr (r), announces state takeover of Detroit.

 In a move that’s been anticipated for months and was presaged by last week’s release of a Michigan Treasury Department assessment  of Detroit’s fiscal health and political willingness to pursue austerity measures, Governor Rick Snyder has used his controversial powers to appoint corporate bankruptcy attorney Kevyn D. Orr to oversee the governance of the state’s largest city.

Two closely intertwined points are in order, the first relating to the racial impacts of emergency management and the second to the kind of austerity measures that such management inevitably takes as the ability to control local affairs is stripped from local electorates. The Detroit decision means that nearly half of all African Americans in Michigan now live in cities where their elected officials have been supplanted by emergency managers appointed by a conservative Republican governor. Half of all black Michigan residents are denied the opportunity to elect the people who make decisions about their communities.

Rev. Edward Pinkney leads first march against PA 4 state takeover of Benton Harbor in 2011.

In the majority-black city of Benton Harbor in western Michigan, an emergency manager’s order effectively reduced elected officials in the city to figureheads, with the power to convene and adjourn meetings, but not to conduct any official business. In the Detroit suburb of Pontiac, Steven Yaccino and Monica Davey write in the NYT, a series of emergency managers who have controlled city government since 2009 have imposed similar constraints on elected officials, and undertaken an aggressive program of austerity (cutting the city budget from $57 to $36 million, a 37% reduction, and outsourcing city jobs to private contractors in the course of reducing the public payroll from 600 to 50 workers) and privatization (selling off the city’s fire trucks, parking meters, wastewater treatment facilities, and the Pontiac Silverdome stadium). 

The symbolism of Black political power in Michigan is, to say the least, conflicted.

Pontiac City Councilman Donald Watkins.

While many whites appear to accept the proposition that Black self-government is doomed to failure through its own profligacy (such comments generally ignoring the history of white disinvestment from cities in racial transition), the substitution of managers appointed by a white conservative governor for officials elected by Black voters is a serious provocation. As Pontiac councilman Donald Watkins argues,

“An emergency manager is like a man coming into your house…. He takes your checkbook, he takes your credit cards, he lives in your house and he sleeps in your bed with your wife.” Mr. Watkins added, “He tells you it’s still your house, but he doesn’t clean up, sells off everything and then he packs his bag and leaves.”

The appointment of Orr, an African American, to direct Detroit’s financial restructuring, is a concession that is absolutely vital to securing even minimum legitimacy for the manager’s decisions, which are likely to hurt.

Former Detroit Mayor Kwame Kilpatrick in court.

The racially disproportionate impact of emergency management is also reflected in the way that the popular media addresses the roots of Detroit’s problems. The conviction of former Mayor Kwame Kilpatrick on corruption charges supports an implicit argument made in the report advocating emergency management: that corrupt and incompetent leadership (particularly by Kilpatrick, the self-styled “hip hop mayor”) took Detroit’s problems from serious to terminal. There’s no doubt that Kilpatrick had a hand in many of the decisions that exacerbated an already bad situation in Detroit. But what has been scarcely acknowledged is that Kilpatrick had some very powerful partners in crime that haven’t been, and won’t be, facing any criminal charges.

As Darrell Preston and Chris Christoff report in Bloomberg, the City of Detroit currently owes at least $474 million in fees to Wall Street banks that it incurred as a result of financial deals it entered into in the early 2000s.

The city started borrowing to plug budget holes in 2005 under former Mayor Kwame Kilpatrick, who was convicted this week on corruption charges. That year, it issued $1.4 billion in securities to fund pension payments. Last year, it added $129.5 million in debt, 9.3 percent of its general-fund budget, in part to repay loans taken to service other bonds.

The loans were structured in an increasingly common form called an interest rate swap. As Andy Kroll writes in Mother Jones, these are contracts in which

[a city and a bank] will “swap” interest rates with each other: the city will pay the bank a fixed rate—3 to 5 percent, say—to borrow money, and the bank will in return pay the city cash based on a floating, variable interest rate. (This is determined by some underlying source, like the LIBOR rate for short-term lending.) The point of a swap deal is that, when the economy was booming, cities could borrow from banks on the cheap, because their fixed payment rate was on par with or better than the bank’s floating rate.

Joe O’Keefe of Fitch Ratings and Stephen Murphy of Standard and Poor’s sell predatory $1.5 BILLION loan from UBS, one of LIBOR banks, to City Council Jan. 31, 2004. Phot0/Diane Bukowski

In principle, this arrangement was intended to make borrowing cheaper for the city. What it did in practice, when interest rates fell after the crash, was create a new debt for the city when the floating interest payments it took from the banks fell far short of the fixed interest it owed back. The gap peaked at $439 million last spring, though rising interest rates have lowered it to “only” $350 million. In perspective, per Preston and Christoff, the burden of these swaps on Detroit in the form of

underwriting expenses, bond-insurance premiums and fees for wrong-way bets on swaps…. almost equals the city’s 2013 budget for police and fire protection.

Matt Taibbi

But wait! one might argue. The city borrowed from banks to pay its bills, and thought that a rate swap was a good way to do it on the cheap. It didn’t work out, but them’s the breaks. Matt Taibbi’s report of similar swaps in Jefferson County, Alabama reflects not a good faith deal made between two informed parties, but

a billion-dollar predatory swap deal cooked up at the highest levels of America’s biggest banks, across a vast fruited plain of bribes and felonies — “the price of doing business,” as one JP Morgan banker says on tape — all the way down to Lisa Pack’s sewer bill and the mass layoffs in Birmingham.

Protest against banks’ role in raising sewer rates in Jefferson County, Alabama.

Although Taibbi uses a lot of naughty words and colorful metaphors and accuses powerful bankers of fraud and other felonies, he’s still the best reporter covering this issue, and the one most willing to cut through the complex jargon of the financial sector so that the layman can grasp what’s happening in these kinds of complex transactions. Please, read the whole report, and this other one about the rigging of interest rates on municipal bond offerings. Interest rate swaps have been a disaster for cash-strapped municipalities across the United States, a way for Wall Street to pick the bones of local governments already desperate for cash that frequently creates even worse obligations that have pushed local governments to bankruptcy.

As for Detroit? As Preston and Christoff report,

The city makes periodic swap payments from money generated by casinos.

If it weren’t so horrifying it might be poetic.

Detroit’s problems aren’t wholly attributable to interest rate swaps, of course; the city’s finances have been in a conjoined decline with its industrial economy and population for decades. But the amount that Detroit owes its counterparties in these swaps purely as a result of the difference between the interest rates on money flows from the city to the banks and the banks back to the city exceeds the larges annual deficit that Detroit has run in the last 10 years. It’s a theft from a city that needs every dime it can scrape up to fund its other obligations, and the failure to discuss interest rate swaps as a part of Detroit’s problems borders on criminal. When the history of the economic crash and its effects on communities around the United States is written, interest rate swaps are going to rank with the automobile, the Federal Housing Administration, and urban renewal as forces that remade metropolitan America.

In the immediate future, will Orr’s plan of attack include seeking legal authority to extricate Detroit from its predatory swap arrangements? Or will the residents of Detroit be forced again to bear the burden of decisions made by others?

• Citgroup lawsuit involves 7 other Jones Day clients

(VOD—According to federal court records, this ongoing lawsuit includes numerous clients of Jones Day, Detroit EFM Kevyn Orr’s law firm, as plaintiffs, although the firm did not handle this particular litigation. In addition to Citigroup, which has now settled, other defendants in the case, which are Jones Day clients or subsidiaries of them, include:   

• 

  Detroit EFM Kevyn Orr said at press conference that there is a “firewall” between Jones Day and its clients as relates to City of Detroit debts, and that he is no longer with the firm. However, he failed to disclose that Jones Day has been tapped to be Detroit’s re-structuring counsel.

  Banc of America Securities, LLC

• Barclay’s Capital Inc.,
• Deutsche Bank Securities Inc.
• Goldman Sachs & Co.
• JPMorgan Chase & Co.
• Morgan Stanley & Co. Inc.,
• UBS Securities LLC 

A list of Jones Day clients (at least some, since it does not include UBS, which is cited elsewhere on the Jones Day website) is available by clicking on JONES DAY CLIENT LIST.).

By Zeke Faux and Patricia Hurtado – Bloomberg

Mar 19, 2013

Citigroup Inc. (C), the third-largest U.S. bank by assets, agreed to pay $730 million to settle claims it misled debt investors about its condition during the financial crisis.

Protesters at Citigroup shareholder meeting in Dallas, Texas

The deal would resolve a lawsuit by investors who bought Citigroup bonds and preferred stock from May 2006 through November 2008, the New York-based lender said yesterday in a statement. The accord requires court approval and would be covered by existing litigation reserves, the bank said.

Citigroup is among the Wall Street firms still dealing with the fallout from the crisis, when the bank almost collapsed amid losses tied to subprime mortgages and took a $45 billion bailout. The company has repaid the rescue. Last year, the firm agreed to pay $590 million to settle a lawsuit brought by stock investors who said they’d been misled.

“At the time they were selling these securities, in reality Citigroup was effectively insolvent,” Steven Singer, a partner at Bernstein Litowitz Berger & Grossmann LLP who represented the debt investors, said in a phone interview.“They were presenting the company to be in substantially stronger financial position than it in reality was.”

Citigroup said in the statement that it still denies the allegations and agreed to the settlement to avoid the cost and uncertainty of litigation. Shannon Bell, a spokeswoman for the bank, declined to comment further in a phone interview.

Corporate Bonds

Philadelphia city workers; their pension board is a plaintiff in Citigroup et al lawsuit.

The lawsuit was filed in federal court in Manhattan in 2008, with investors claiming Citigroup misled purchasers of 48 issues of its corporate bonds. Plaintiffs in the case include the Louisiana Sheriffs’ Pension and Relief Fund, Minneapolis Firefighters’ Relief Association and the City of Philadelphia Board of Pensions and Retirement.

Citigroup’s bonds dropped as losses piled up during the collapse of the U.S. mortgage market. Its $4 billion of 10-year notes, issued in November 2007, slid as low as 79.7 cents on the dollar in 2008, according to data compiled by Bloomberg. The firm lost more than $29 billion in 2008 and 2009.

In 2010, U.S. District Judge Sidney Stein denied part of a motion by Citigroup to dismiss the case. Stein threw out claims that involved alleged lack of disclosure about auction-rate securities and part of the plaintiffs’ case related to structured investment vehicles.

The 10-year notes climbed above face value to 118.6 cents yesterday, the data show. Citigroup’s stock has gained about 17 percent this year and was little changed in after-hours trading yesterday, following the settlement’s announcement.

The plaintiffs said in a memorandum of law to the court that they “have concluded that the terms and conditions” of the accord “are fair and reasonable and in their best interest.”

The case is In Re Citigroup Bond Litigation, 08-cv-09522, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Zeke Faux in New York at zfaux@bloomberg.net; Patricia Hurtado in New York at pathurtado@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; David Scheer at dscheer@bloomberg.net

On Saturday March 23rd at 1pm help Detroit Youth stand up for education and say no to incarceration! No funding for learning but there is funding for prisons?! It is time DETROIT YOUTH take over and adults hear solutions to stop the school to prison pipeline!

Detroit youth will meet at 1pm at Cass Park, 2727 Second Ave, and begin marching at 1:30pm to the Wayne County Jail a mile away to launch their campaign this year for restorative justice resources in their schools… All ages are welcome!

We can provide FREE Parking if you’re marching with us. If you’re bringing a car, please let us know for parking purposes. Make sure you email RSVP so we can send you all the info at detroitYOUTHtakeover@gmail.com .

https://www.facebook.com/events/546882672010488/#!/YOUTHVOICEdetroit
https://www.facebook.com/events/546882672010488/#!/events/546882672010488/

The Mental Evolution of the Black Race is key.

Essay

The Tea Party and Corporate America

By Ms. Anonymous

Its 3:47am, Tuesday, August 14, 2012, something’s on my mind.  21st Century Politics in America.  What are the politics that affect my everyday life?  I live in a country bitter against me and my race for no surface reason.  And, even that can be resolved.  In any event, there’s something greater going on in America.  I sent a tweet to writer Eugene Robinson sometime ago, and in it I asked:  America never loved me, being of African descent and slavery and simply being a woman, but when did America stop loving itself?  

From here my writing could go in any direction, like helping others, who like me need to understand that the Mental Evolution of the Black Race is at crucial moment for we must change our Thought Waves to a Higher Frequency, the Human Race calls for us to raise our Thoughts for the occasion.  And, I know the process toward that goal, and it is quite simple, but I will do that at another time.  More important now, America is an impediment or an obstacle that stands in the way of American progress, politically and otherwise, and that impediment or obstacle puts America at risk of not Moving Forward, in my opinion.  What is that impediment, that obstacle, I believe, THE CHRISTIAN EVANGELICAL RIGHT WING REPUBLICAN PARTY, better known as, the Tea Party.  

Have you asked yourself who they are, where did they come from, what do they think, when and how did they take over the Republican Party and why are they so hell bent on their it’s my way or the highway attitude?  Are you telling yourself what do I care what this writer thinks?  I say to you, you should care what I think.  You should care what you think and I should care what you think.  More importantly, right now, right now, WE ALL NEED TO CARE WHAT they the CHRISTIAN EVANGELICAL RIGHT WING REPUBLICAN TEA PARTIER’S THINK because they don’t care what you or I think as long as our thinking is different from theirs.  

The Far Right Wing branch of the Republican Party includes a number of evangelicals, evangelicals who have church members that are Corporate America and they along with church leaders, in my view, are the power behind the New 21^st century Republican Party.  They control not only the Republican Party, they control the U.S. Congress and they have enough power in the U.S. Senate to filibuster any attempt made by Democrats who have the majority, to improve life in America.  They’ve blocked every attempt made by the Democrats and the President whose party is the majority, because their intent is to destroy America and the Middle Class.  They’ve blocked the Democrats and the President who have proposed bills that could potentially put millions of unemployed American workers to work, at every phase.  Or, if they compromise which is rarely, they place abortion reversal related stipulations within the bill. 

Because they also hold several key political positions at the State level, and with Corporate America’s support behind them, I believe, the Tea Party, if allowed to stay in power, will succeed with their plan to destroy America and our way of living.  Because of their political strength and with Corporate America’s support behind them, America has become more racially, culturally and financially divided and in some cases dumber as a Nation. Why?  I believe, that while we slept as a Nation, mired in Frank Schaeffer Sr.’s interpretation of the Bible and how he, thought “Jesus” would want us to live, according to Frank Schaefer Jr., “[they] were calling for civil disobedience, the takeover of the Republican Party, and even at overthrowing our “unjust pro-abortion government [U.S. government].”(293)  

The Far Right Religious right’s mission to destroy America began long before 1973.  In any event, this year’s vote for the President and the over what party will control both Congress and the U. S. Senate, depending on the results, could change America as we know it.  And, you do know what?  I’ve had the pleasure of being introduced to one of the Elect who helped found THE FAR RIGHT WING REPUBLICAN PARTY who along with others that are responsible for America’s financial, political and racial divide.  Continue reading →

Michigan Gov. Rick Snyder (at podium) announces state takeover of Detroit, the world’s larges Black majority city outside of Africa. Mayor Dave Bing (r) and new EFM Kevyn Orr stand at attention during press conference March 14, 2013.

                                                                                                                                                            UBS, which sold Detroit predatory $1.5 billion POC loan, involved in LIBOR  

LIBOR interest rate-rigging scandal “dwarfs any financial scam in history”

City Council to decide on Jones Day restructuring contract

March 16, 2013

(VOD–this is the first in a series of stories on Snyder’s EFM takeover of Detroit. More details on events later.) 

Detroit’s new EFM Kevyn Orr of Jones Day law firm addresses media March 14, 2013.

DETROIT – Detroit’s newly-appointed “Emergency Financial Manager” Kevyn Orr was virtually speechless when VOD asked him what he would do about banks like UBS AG and others involved in the global “LIBOR” interest rate-rigging scandal, as it relates to Detroit’s gargantuan debt load of more than $12 billion. 

“This dwarfs by orders of magnitude any financial scam in the history of markets,” Andrew Lo, Professor of Finance at the Massachusetts Institute of Technology, said about the LIBOR (London Interbank Offered Rate) case.

LIBOR fraud has resulted in over $800 trillion in profit to banks and lenders world-wide, at the expense of municipal and other government services, as well as peoples’ needs.

VOD cited to Orr the fact that UBS loaned the City of Detroit $1.5 billion in 2004 in a predatory “pension obligation certificates” scheme, before the global economic meltdown of 2008. The city later defaulted on the loan twice, causing its debt ratings to plunge and interest rates to skyrocket. Because of the defaults, the city’s income from state revenue-sharing and from casino taxes is now funneled through a trustee, USBankcorp, to ensure payment of the debt. 

Stephen Murphy of Standard and Poor;s presses City Council to approve $1.5 billion POC loan from UBS during meeting Jan. 31, 2004. Also shown (l to r) former Detroit CFO Sean Werdlow, Joe O’Keefe of Fitch Ratings, then Deputy Mayor Anthony Adams. UBS just paid $1.5 billion after admitting fraud in the LIBOR scandal; Standard and Poor’s faces a $5 billion fraud lawsuit by the USDOJ./ Photo by Diane Bukowski.

UBS AG just paid a fine of $1.5 billion to the U.S. Justice Department, admitting to fraud in the scheme. 

“‘I’m aware of those things,” was Orr’s only response to VOD’s question about LIBOR and UBS, during a press conference held by Michigan Gov. Rick Snyder, with Detroit Mayor Dave Bing loyally standing by, on Mar. 14 at Snyder’s Detroit office in the Cadillac Building.

Protester outside EM press conference Marcy 14, 2013 calls on city to confront banks.

One trader has said LIBOR interest-rate rigging has been going on since at least 1991. Exposure began as early as 2005. 

“The Bank for International Settlements estimated that outstanding interest rate contracts linked to Libor were valued at about $450 trillion in the second half of 2009. Nearly all 2008 subprime adjustable rate mortgages in the U.S. were similarly pegged to Libor, according to a Federal Reserve Bank of Cleveland report,” a recent USA Today article said.

VOD has discovered why Orr was didn’t say anything more about LIBOR during the pres conference.

Jones Day Managing Partner Stephen Brogan in Saudia Arabia in 2012 to open another of its many offices in that kingdom.

Orr hails from the world’s third largest law firm, Jones Day, which has been tapped to be the city’s re-structuring advisor (if approved by City Council). Jones Day has over 2500 lawyers, 828 partners (of which Orr is only one), 35 offices across the globe, and gross revenues of $1.6 billion in 2011. Founded in Cleveland, Ohio, it is now based in Washington D.C. Its managing partner is Stephen Brogan.

Orr said he has left the law firm and that it has “firewalls” in place to prevent conflicts of interest, but did not disclose the firm is up for the costly city contract.

Orr’s bio on the Jones Day website says, “Kevyn Orr has practiced in the areas of business restructuring, financial institution regulation, and commercial litigation since 1984.” It says he was part of the team representing Chrysler LLC as well as other corporations in bankruptcy proceedings, and that he defended URS/WGI against USDOJ claims.

Jones Day itself has acted as advisor to most of the LIBOR banks, Those include UBS Limited, a subsidiary of UBS AG, as recently as August, 2012, well after the LIBOR scandal began breaking.

Jones Day client banks involved in LIBOR scandal.

From the Jones Day website:

“Deutsche Bank, HSBC Bank, UBS Limited, and BBVA underwrite £500 million public offering by PepsiCo 

UBS CEO Sergi Ermatti

August 2012 –Jones Day advised Deutsche Bank, AG London Branch; HSBC Bank plc; UBS Limited; and Banco Bilbao Vizcaya Argentaria, S.A., as underwriters, in connection with the public offering by PepsiCo, Inc., a leading global food and beverage company, of £500 million (US$791.2 million) of 2.500% Senior Notes due 2022. The Notes are expected to be listed on the NYSE. 

“UBS, Jefferies, Baird, Needham & Company, and Natixis underwrite $77 million IPO by Sequans Communications 

April 2011- Jones Day advised UBS Limited; Jefferies & Company, Inc.; Robert W. Baird & Co. Incorporated; Needham & Company, LLC; and Natixis Bleichroeder LLC in connection with the $77 million initial public offering of American Depositary Shares on the NYSE by Sequans Communications S.A. . . .” 

 Along with UBS, Deutsche Bank and HSBC Bank are among 13 banks sued by the City of Baltimore and dozens of other municipalities, labor unions, financial funds, and individual investors across the U.S. in a mammoth federal multidistrict litigation matter in Manhattan federal court, in addition to investigations being conducted by governments across the world. 

Other Jones Day clients involved in LIBOR scandal

Other citations from the Jones Day website: 

“Barclays, BNP Paribas and UBS complete $1 billion public offering of 4.875% Global Bonds due 2015, Global Benchmark, SEC Registered 

Barclay’s CEO Bob Diamond

November 2005 – Jones Day assisted Barclays Capital, BNP Paribas Securities Corp and UBS Limited in connection with the public offering by Landwirtschaftliche Rentenbank of Global Benchmark, SEC registered of $1 billion 4.875% Global Bonds due 2015. Landwirtschaftliche Rentenbank is a financial institute organized under the public law of the Federal Republic of Germany.  .  .  .

“Deutsche Bank, UBS and Nomura underwrite $1.5 billion global bond public offering by Landwirtschaftliche Rentenbank

October 2004 – Jones Day represented Deutsche Bank AG, Nomura International plc, and UBS Limited as lead underwriters in connection with the public offering by Landwirtschaftliche Rentenbank of Global Benchmark, SEC registered $1.5 billion 3.65% Global Bonds due October 20, 2009 . . .” 

Barclay’s was the first bank British regulators went after in the LIBOR scandal, with investigations beginning in 2005, according to a BBC article. 

Deutsche Bank CEO Josef Ackerman.

One of the emails cited in the investigation included the following: “Hi Guys, We got a big position in 3m libor for the next 3 days. Can we please keep the lib or fixing at 5.39 for the next few days. It would really help. We do not want it to fix any higher than that. Tks a lot.”  Barclays Bank trader in New York to submitter, 13 September 2006.

“On 27 June [2012], Barclays admitted to misconduct,” said the BBC article. “The UK’s FSA [Financial Securities Administration] imposed a £59.5m penalty. The US Department of Justice and the Commodity Futures Trading Commission (CFTC) imposed fines worth £102m and £128m respectively, forcing Barclays to pay a total of around £290m.”

Barclay’s CEO Bob Diamond and Chairman of the Board Marcus Agius later resigned, and after a criminal probe, three Barclay’s traders went to prison.

Chase Bank CEO Jamie Dimon.

On its website, Jones Day also lists as clients Bank of America, Citigroup, Morgan Stanley Realty (a subsidiary of J.P. Morgan Chase),  J.P. Morgan Chase, and the Royal Bank of Scotland (RBS) Commercial Services, all defendants in the U.S. LIBOR class action lawsuit.

Other well-known banksters serviced by Jones Day include Lehman Brothers Holdings, LLC, what is left of Lehman Brothers. That company’s collapse began the global meltdown of 2008. Its accounting firm Ernst & Young has been advising the City of Detroit on financial matters since 2011, at the same time being sued by the states of New York and New Jersey for misrepresenting the company’s financial situation.

Also included is Goldman Sachs, now advising the Detroit Board of Water Commissioners on the current plan to transform the Detroit Water and Sewerage Department into two authorities completely disconnected from the City of Detroit.

VOD sent the following email to Kevyn Orr asking him for his response to these allegations, but has not yet heard from him:

Mr. Orr, this is Diane Bukowski, editor of The Voice of Detroit, online at http://voiceofdetroit.net. You may or may not recall that I asked you during the Governor’s press conference March 14 what you would do about the banks’ role in Detroit’s debt crisis. I specifically brought up the LIBOR scandal and the fact that UBS, a defendant in LIBOR litigation which has so far paid $1.5 billion in fines for interest-rate rigging, holds one of Detroit’s largest debts, the $1.5 billion Pension Obligation Certificate loan approved by City Council in 2004.

You stated you were “aware” of the situation, but did not answer my question regarding what you planned to do about it. Since we spoke, I have researched Jones Day clients, and found that Jones Day has represented the following clients in various deals, clients who are defendants in LIBOR-related cases:

This illustation was not included in email to Mr. Orr.

1) UBS Limited, a subsidiary of UBS AG.
2) Deutsche Bank
3) Barclay’s
4) Bank of America
5) Citigroup
6) Morgan Stanley Realty (a subsidiary of J.P. Morgan Chase)
7) J.P. Morgan Chase, and
8) the Royal Bank of Scotland (RBS) Commercial Services, a subsidiary of RBS.

From my research. I do not see that Jones Day represented these entities in the LIBOR litigation. However, the deals in which Jones Day represented these banks range at least from 2004 through 2012, a period during which the LIBOR scandal was emerging and finally blew completely in 2012. One trader has said in published material that LIBOR interest-rate rigging has been rampant since at least 1991.

DWSD service area

The City of Baltimore, various other municipalities and counties, pension funds, investors like Charles Schwab and numerous other entities are involved as plaintiffs in the LIBOR litigation.

You have indicated in published reports that City of Detroit assets such DWSD and Belle Isle are on the table to resolve Detroit’s alleged financial crisis.

Questions:

1. Are you planning to research, from your study of Detroit’s books, how much the city may have lost due to criminal LIBOR-related deals with UBS and other institutions cited above, which involved interest-rate rigging? Do you plan to join Baltimore and other municipalities in seeking redress from these banks?

Wayne County homeowners lined up to get help from United Community Housing Coalition at foreclosure hearing several years ago.l

2. Many of these same banks have been involved in predatory lending practices in Detroit and other cities with large populations of color. As a result of foreclosures and evictions during the last period, Detroit has lost over 250,000 residents. I see by your bio on the Jones Day site that you have helped write several documents related to TARP, so you are familiar with the fact that TARP was supposed to allow homeowners to negotiate affordable monthly payments, which has been done in only a small percentage of cases. Do you plan to pursue restitution from the banks and mortgage companies involved for the resulting destruction of a large part of Detroit’s tax base?

Chrysler Detroit Axle RIP.

3. You are most well-known as a participant with other Jones Day partners in the Chrysler bankruptcy and the creation of the Fiat-led “New Chrysler.” You therefore must be aware that Chrysler closed two plants in the Detroit area as part of the bankruptcy: the Sterling Heights plant, and the Detroit Conner Avenue plant, and moved production from its Detroit axle plant to Port Huron, MI. Chrysler along with the other auto companies has shut many more plants in the Detroit region beginning with the historic closure of the Chrysler Hamtramck Assembly Plant, better known as “Dodge Main” on Jan. 4, 1980. These plants were generally moved to the South or overseas. These closures decimated Detroit’s tax base both in terms of corporate taxes as well as individual taxes from Chrysler workers. Do you plan to seek restitution from Chrysler or any other automaker for the resulting loss of revenue to the City of Detroit?

4. Given the above issues, can you recommend hiring your former long-time employer, Jones Day, as Detroit’s “restructuring” consultant?

5. Is this hiring of Jones Day not a conflict of interest for you as Detroit EFM?

Thank you kindly for your prompt responses to my questions. Please feel free to correct any errors of fact. My story will likely be going to press today, but I can publish your responses in a follow-up story as this is the first in a series.

Related documents and articles:

Amended LIBOR class action complaint 12 23 11

Wikipedia: Libor scandal

http://www.bbc.co.uk/news/business-18671255

http://voiceofdetroit.net/2013/03/12/grand-theft-of-detroits-water-dept-imminent-water-board-mtg-wed-march-13-2pm/

http://voiceofdetroit.net/2013/02/24/u-s-banks-scrutinized-in-libor-scandal-probe/

http://voiceofdetroit.net/2013/02/17/group-sues-for-detroits-debt-documents-state-review-team-leaks-negative-findings/

http://voiceofdetroit.net/2012/12/28/detroit-city-council-6-collaborators-in-war-on-people/

http://voiceofdetroit.net/2012/12/19/ubs-admits-fraud-in-1-5-billion-libor-rigging-settlement/

http://voiceofdetroit.net/2012/12/10/state-blitzkriegs-detroit-to-get-deal-with-wall-street-will-council-stand-up-at-meeting-dec-11/

http://voiceofdetroit.net/2012/09/27/detroit-dwsd-debt-shows-wall-street-never-loses-on-bad-swaps/

http://voiceofdetroit.net/2012/07/23/detroit-cut-2-billion-pension-bond-deal-with-ubs-one-of-banks-sued-by-baltimore-others-in-libor-scandal/ (copies sent to Mayor Bing, City Council members)

http://voiceofdetroit.net/2012/07/20/libor-scandal-could-turn-ugly-as-cities-begin-to-sue-banks/

Sandra Hines demands state pay Detroit the money it owes, outside press conference announcing Detroit EM March 14, 2013.

By Joseph Kishore

WSWS.org editorial

March 15, 2013 

DETROIT — With the appointment of an emergency manager on Thursday, Detroit became the largest city in US history to be taken over by the state government. The new manager, bankruptcy lawyer Kevyn Orr, will have vast powers and one essential task: to carry out a brutal assault on the jobs and living conditions of the working class.

Michigan Gov. RIck Snyder announces appointment of Kevyn Orr (in rear) as Detroit EFM March 14, 2013.

What is taking place in Detroit has national and international significance. The Financial Times of London cited one person involved in the discussions on the imposition of a financial manager as saying, “This will be the best case study of what it means to restructure a city.” In an editorial, the newspaper called for “radical–and unpopular–action” to address Detroit’s financial woes, a position shared by virtually every mass circulation newspaper in the US.

The “restructuring” of Detroit is a euphemism for a slash and burn policy of destroying city jobs, cutting wages and pensions, gutting social services from sanitation and firefighting to health care and education, and handing over city assets to private bankers and speculators. The very social forces responsible for the city’s present state are utilizing the crisis of their own making to step up their plundering of public resources and further redistribute the wealth from the bottom to the top.

Protester at rally outside EM press conference March 14, 2013.

Exhibiting the ruthlessness that is a hallmark of American capitalism, the ruling class, in the pursuit of its program of social counterrevolution, is dispensing with the trappings of democracy and imposing a bankers’ dictatorship over the city.

The broad consensus within the political establishment for these measures was on display Thursday. At a press conference announcing the decision to appoint Orr, a lifelong Democrat. Republican Governor Rick Snyder stood side by side with Detroit’s Democratic mayor, David Bing, who pledged his support. The formal decision to hire Orr and set his salary at $275,000 was made by the state’s financial board, headed by Michigan Treasurer Andrew Dillon, also a Democrat.

As for the Democratic Party-controlled City Council, it has opposed the appointment of a financial manager on the grounds that it can more effectively impose the sweeping cuts demanded by the banks and auto bosses.

Among the considerations in naming Orr is, no doubt, the fact that he is African American. For decades, the Democratic Party establishment has employed racial politics to divide the working class. To the extent that there has been any opposition to the emergency manager from within the political establishment, it has been framed in racial terms, summed up in the charge that “white Lansing” is seeking to control “black Detroit.” Yet Orr, like Bing, is no less ruthless a representative of the ruling class than Snyder and Dillon.

Detroit is Ground Zero in bankers’ takeover of cities.

Behind these local and state officials stand the Obama administration and the Wall Street financial interests that it represents. The administration views Detroit as a model for its plans nationwide.

The identity of the person chosen to fill the position of emergency manager indicates what is in store for the vast majority of Detroit residents. Orr played a critical role in the 2009 bankruptcy of Chrysler, part of the Obama administration’s restructuring of the auto industry, which was carried out with the full support of the United Auto Workers union. This involved the closure of dozens of plants, the elimination of tens of thousands of jobs, the halving of the wages of newly hired workers, cuts in benefits, and a ban on strikes.

Orr will have a similar agenda for the city of Detroit. Already, Bing and the City Council have imposed a 10 percent wage cut and laid off thousands of city workers. Basic social services have been slashed.

Linda Willis marches with others from Bank of America offices to CAYMC May 9, 2012.

By the end of the month, under a new law passed at the end of last year, Orr will have the power to rip up labor contracts, cut social programs and sell off city assets. The possibility of throwing the city into bankruptcy is being actively considered, since such a move would provide a legal fig leaf for cutting the pensions of current retirees.

The all-purpose justification for these measures is the claim that there is no money to provide for basic social services. The population of Detroit, more than a third of which lives in poverty, has supposedly been “living beyond its means” and stubbornly refusing to make the “hard choices” dictated by the crisis, which is inevitably presented as something akin to an impersonal and socially neutral act of nature.

The “no money” pretext is a lie. The deficit of Detroit stands at $327 million. In comparison, a handful of billionaires in the state have a net worth of $24 billion, close to 75 times the budget deficit. A mere ten percent surtax on the wealthiest nine individuals in Michigan would cover the city’s deficit 7 times over.

Mike Illitch

Dan Gilbert

The Wall Street investors seeking to make a killing off of Detroit’s municipal bonds pull in hundreds of millions or billions of dollars every year. Wall Street giants such as Bank of America, JPMorgan Chase and UBS have extracted more than $474 million from the city in fees related to the sale of debt, according to a report from Bloomberg News.

Among those who stand to benefit most from the emergency manager are Mike Ilitch (net worth $2.7 billion), the owner of Little Caesars Pizza, and Daniel Gilbert (net worth $1.9 billion), the founder of Quicken Loans. Both have been buying up land at bargain basement prices, betting that an emergency manager will “revitalize” the city center.

(L-R) UAW President Ron Gettelfinger, Chairman and CEO of General Motors Richard Wagoner, Chairman and CEO of Chrysler LLC Robert Nardelli and President and CEO of the Ford Motor Company Alan Mulally prepare to testify before the House Financial Services Committee on Capitol Hill November 19, 2008 in Washington, DC. The leaders of the “Big Three” Detroit automakers and the head of the union that represents their workers were on Capitol Hill to ask lawmakers for $25 billion to help them weather the recent financial crisis and “retool” for the future. Where’s the bail-out for the people of Detroit?

The Big Three auto companies, to which Obama has pointed as an example of a resurgent Detroit, made over $11 billion in combined profits last year, thanks to the imposition of poverty-level wages. The top executives have awarded themselves tens of millions of dollars.

The fate of Detroit epitomizes the process by which vast sums of money have been accumulated by the financial elite through the dismantling of industry and neglect of the social infrastructure.

Since the crisis of 2008, hundreds of billions of dollars have been used to bail out the banks and push stock prices to record highs. The Federal Reserve prints $85 billion every month, 260 times the deficit of Detroit. This money is handed out to the banks and used to fuel new speculative bubbles.

Cities and states throughout the country are implementing similar measures to those being carried out in Detroit. At the national level, after trillions of dollars in budget cuts, the Obama administration is conspiring with Republicans to slash trillions more from the key federal health care and retirement programs.

Protest in Greece against austerity measures imposed by the IMF banks.

This program of austerity for the working class and record profits for the corporations is international. In Greece, Spain, Italy and other European countries, governments installed by the banks are imposing depression conditions to ensure that national treasuries, bled dry to bail out the banks, are able to pay off major investors and bondholders. Continue reading →

“Policy Makers…cause the darkness:  they created discrimination…perpetrated unemployment…property… the slum or the handy work of a vicious system…Negroes lived in them, but they do not make them any more than a prisoner makes a prison.”       DR. MARTIN LUTHER KING, JR.

Tyrone Travis

By Tyrone Travis

March 14, 2013 

In the March 2, 2013, issue of the Detroit News, staff writer Darren A. Nichols, said “…Detroit’s…collapse…has been decades in the making.” Then, he told us that the fiscal crisis was caused by a “steady loss of population, over estimating revenues, spending more than taking in, borrowed money to pay debt.” 

Mr. Nichols, Governor Rick Snyder and others keep telling us that population loss caused today’s fiscal crisis.  But, intentionally don’t tell us that there are other sources that pay taxes and hire the majority of the population that pay taxes.  The sources are the establishments: manufacturing, wholesale and retail that steadily left Detroit.  Therefore, I make the loss of establishments and their consequences, my focus. 

After World War II, the Federal government of the United State of America faced three (3) major problems:

•  A Trade Crisis,
•  A Cold War, and
•  Immigration – Policies Caused Revenue Shortfall. 

SECTION I. Trade Crisis and the Suburban Policy 

Dresden, Germany after Allied bombing.

During World War II, Western European Countries laid in ruins, as a result of those countries bombing each other’s industry and agriculture.  Those countries spent their dollar and gold reserves buying food, arms, ammunition and other goods from American companies.  When the war ended, there was a persistent imbalance in the International payments. 

At that time, this imbalance was called a “Dollar Shortage.”  ⁽¹⁾  Countries conduct trade with each other, by each having a reserve of the other’s currency.   The primary way countries acquire each other’s currency is through trade – selling and buying good from each other.  Western Europe and Japan had no or very little dollars to buy American goods, and threatened to destroy the trade relationship between capitalist countries and capitalism itself. 

Protester outside Gov. Rick Snyder’s press conference announcing Detroit takeover by EM March 14, 2013.

The Federal government adopted a policy to accept large quantities of imported goods from Western Europe and Japan.  This allowed them to sell goods on American Markets, near duty free, earn dollars and keep trade alive. 

Within the above trade policy, there was a Suburban Policy, where the Federal government adjusted the economy to accept abnormal quantities of imports, by encouraging manufacturing, commercial businesses and majority of the white population to move to the suburbs. 

The Federal government used “…road construction money” ⁽²⁾ , to build expressways that enabled Detroit Auto companies to export capital out of Detroit by building 25 factories in the suburbs between “1947 to 1958 “⁽³⁾ .  

During the middle 1950’s, auto companies start moving their auto operations out of Detroit’s factories to their new factories in the suburbs.  After 1962, manufacturing started closing in Detroit.   The auto companies scattered their plants through-out suburban areas, with the aim of minimizing the impact imports would have on the employment rate in anyone area in the suburbs. 

In 1954: “Northland Center, built by the J. L. Hudson Co., the First Suburban open-air shopping facility, open in Southfield… featuring many local stores, including Winkelman’s, Hughes & Hatcher, Cunningham’s Drugs, Sanders and Himeloch’s”.⁽⁴⁾ In 1954: Eastland Center opens in Harper Woods, J. L. Hudson Co. is the developer, etc.   This clearly showed how commerce was being moved out of Detroit. 

 In January 14, 1977, issue of the Detroit News, it was noted that “while 278 plants were being closed in Detroit, Macomb County gained 80 plants, Oakland County gained 151 and Western Wayne County gained 30”. 

Chrysler’s Hamtramck Assembly Plant, better known as “Dodge Main,” closed Jan. 4. 1980 despite valiant efforts of UAW Local 3 workers to save it.

Former Mayor, Coleman A. Young, said “…the City of Detroit became abandoned to those who could not leave; it became a repository of the poor, the aged and the Blacks.”⁽⁵⁾ 

Detroiters were prevented from commuting and moving to the suburbs where the jobs existed because of two (2) policies: respectively, the policy that ended mass transit (184 streetcars) that ran from downtown Detroit throughout Southeast Michigan, and discriminatory Federal housing policies which forced the city’s residents to remain jobless in Detroit. 

The aim or results of the above two policies shut Detroit residents out of the suburban labor market, where they would bear the effects of the trade policy – permanent loss of jobs and employment opportunities.  This has been the condition in Detroit for over five (5) decades. 

SECTION 2. Trade Crisis/Cold War, Deteriorated Tax Base and Jobless Crisis 

I reiterate Section I, Trade Crisis and consider it with Section 2, Cold War because both problems that faced the Federal government after World War II were solved by the Suburban Policy. 

“…the auto industry began to decentralize…frightened by the ensuing cold war and the hysteria evoked by the threat of atomic reprisal, began scattering its plants, into the suburbs and into other states far from Detroit.  As a result, the city experienced a steady deterioration of its tax base…“.⁽⁶⁾ 

The income tax returns processed by the Income Tax Division of the City of Detroit, through calendar years 1971 to 2009 indicates that Detroit’s income tax base continued to deteriorate, as establishments left the city, as illustrated below. 

Historically, this country was divided between the independent Free Farmers, in the Northeast, and Slave owning landowners, in the South.  Therefore, the oldest major source of tax revenue was tax on land.   George Leland Bach said “property tax on land and buildings were until World War II the most important single tax source in the United States.” ⁽⁷⁾  During World War II, employees earning wage income, increasingly out numbered farmers, at the same time, income tax actually became the tax base.  In modern day capitalist societies, it goes without saying, the majority of the working age, residents in a given area, 16 to 64 years old must have a job and wage income to pay taxes, etc. 

Detroit’s new EFM Kevyn Orr was among Jones Day lawyers representing Chrysler in its bankruptcy filing. Thirteen U.S. Chrysler plants closed, including 3 in the Detroit area.

The above numerical data on the exporting capital means, when auto companies built new factories in the suburbs, between 1947 and 1958, moved their operations and closed their factories in Detroit. The data on the history of the ever-decreasing employment rates is factual proof that the federal government’s suburban policies have generally eliminated Detroiters from the labor market. 

As a result, the city government budget has had a consistent revenue shortfall, which made it necessary to borrow money to provide basic services for its residents.  From 1973 to 2006, 46 unlimited obligation bond proposals were approved out of 56 ballot proposals in 33 years.  The crisis of Residential Joblessness is the real cause of today’s fiscal crisis in Detroit and this is absolutely not Mr. Nichols or Governor Rick Snyder one-sided population pretext. 

SECTION 3. 1965 Immigration Act/Small Business Administration Policy

Around the middle 1970’s, businessman Michael George, a Chaldean, formed a Metro Detroit Investment Co., which held a federal license and received “government aid to provide financing  for small or minority entrepreneurs in disadvantaged neighborhoods,“⁽⁸⁾  in Detroit.  For 20 years between 1977 to 1997 Metro Detroit Investment existed, “nearly all loans it gave out were to … the Chaldean Community, which dominates… businesses in Detroit” ⁽⁹⁾ and “almost none of the loans went to African Americans.” ⁽¹⁰⁾ 

Detroit’s Grand River, once a vibrant business strip, as it looks today. Many Black businesses have closed across the city.

The Federal government’s 1965 Immigration and Nationality Act and the Federal Small Business Administration Policy wiped out the Small Black retail businesses and have driven Black workers from small businesses in Detroit. This act and policy has replaced Blacks with Non-Resident-Immigrants, who pay no Detroit property taxes, no utility tax (for police service), no water/sewerage fees, etc. (VOD: for example, the exploitation of undocumented Mexican workers by Detroit contractors who use them in street construction and public landscaping.)

Declaration for Life 

The crisis in Detroit is residential Joblessness that was created by the Federal government policies.  Emergency Financial Manager, Attorney Kevyn Orr’s, plan to turn around the Budget will be destructive for the residents in the City of Detroit.  Destructive means GENOCIDE. 

The short term interest – all debt owed Detroit by State government and the private sector must be paid to Detroit immediately.  The long term interest – capital investment in full employment for Detroit residents or the Federal Government must face its responsibility for the destructive consequences of its suburban policy on the residents of Detroit by creating a “guarantee income” for Detroiters. “⁽¹⁰⁾

Notes 

1.         “A Trade and Tariff Policy in the National Interest”, by the Public Advisory Board               for Mutual Security, Washington: Feb. 1953. Page 61-67

2.         “Detroit Free Press 2-10-1993 Page 8A (construction)

3.         “The Detroit Almanac, 2001, 2001 by Detroit Free Press Page. 302

4.         The Detroit News Page 7A, May 23, 2009

5.         Ebony Magazine Feb 1974, “If Detroit collapses, the State will also,” by Coleman  .             A. Young

6.         Ibid

7.         Economics – Seventh Edition by George Leland Bach

8.         The Detroit News Page 1 and 9, 12/27/1999

9.         Ibid

10.       Ibid

11.       Where Do We Go From Here – chaos or community, by Dr. Martin Luther     King, Jr.                                                                                                                                         

Sculpture of famed boxer and national Black hero Joe Louis’ fist in downtown Detroit. Tom Barrow is a descendant of Joe Louise. Blacks across the country celebrated in the streets when he won the world heavyweight title.

DETROIT (March 14, 2013)

Protesters swamped Gov. “Rictator” Snyder during Benton Harbor’s annual Blossomtime Parade last year, calling him a “dictator.:

Today is a sad day for the Barrow family, its ancestors and for the city of my birth. Today, conservative extremists, headed by a governor who fooled a majority progressive state, takes the Democracy of my city and I am saddened. Now, over 50% of Michigan African Americans are needlessly under state control. Only the naive will believe it has to do with some kind of fiscal emergency for I know that none truly exists. No my friends, it has to do with Detroit’s assets.

Some reading this post disagree and openly applaud and welcome this take over, not realizing or understanding that it signals your own democratic demise. As the governor takes our city and its assets,

Protesters during Jim Crow era in the South.

I am reminded of the unjust Jim Crow laws from decades ago. Those unjust laws are as much a part of our history as was the unhappy years of slavery and must never be forgotten or disregarded. When we disregard that history and ignore that the ancestors of those who created those unjust Jim Crow laws back then were raised by those law’s creators and are today in many positions of leadership with that same mindset, we are destined for political impotence.

No my fellow Detroiters, you must never stop resisting for now Detroit, we will be given a Master…makes no difference the color of the face in front of you, for behind that face is the true Master. No my fair minded fellow Detroiters everywhere, while I am saddened, I am also angry for we are being falsely oppressed based upon a phony…faux…non-existent fiscal emergency rooted in an unjust law which is nothing short of a Jim Crowesque abuse of law. PA4 was rejected and an unjust successor was created to oppress.

Tom Barrow

My friends, if we did not know why in 2009 the Wayne County Canvassers disregarded 60,000 ballots in a Mayoral contest where only 9,500 would alter the result because case seals had been changed, we should all know now.

Finally, over the next few weeks my family and I shall decide our future in Detroit….for now more than ever we need strength of leadership as Livonia’s Michael Duggan has been sent and he is in the temple, chosen to become Bing 2.0 and complete the take over circle.