OUTSIDE THE BANKRUPTCY COURT
231 E. LAFAYETTE, DETROIT
CANCEL DETROIT’S DEBT TO THE BANKS
HANDS OFF CITY SERVICES & WORKERS’ WAGES AND PENSIONS
On July 22, 2013 Federal bankruptcy Judge Steven Rhodes, Rhodes removed the order of Michigan Circuit Court Judge Rosemarie Aquilina, who earlier ruled that the City of Detroit bankruptcy filing was unconstitutional insofar as it targeted city workers’ pensions, which are guaranteed under the state constitution, and stayed bankruptcy proceedings on that basis. Rhodes, however, did not issue a ruling on the constitutional issue itself.
The day after demonstrations by City of Detroit retirees and community activists demanding Hands off our Pensions, Make the Banks Pay, Republican state Attorney General Bill Schuette announced that he would intervene in the bankruptcy case and join those advocating that public pensions in Michigan are not subject to being cut in bankruptcy. While Schuette is no friend of workers and cannot be trusted to aggressively fight for this position, the fact he took a position at odds with Snyder and Orr reflects the power of the mobilization thus far and the need for continued demonstrations.
The banks’ ‘unclean hands
In bankruptcy, bank debts are subject to equitable considerations, meaning what’s fair and just. If the banks are guilty of what’s called unclean hands, then their debts are subject to liquidation. For example, in the recent Jefferson County Alabama case, because JPMorgan Chase was found guilty of bribing officials in connection with municipal bonds, they were forced to write off 70 percent of the debt to the county.
Two of the biggest Detroit bondholders, UBS and Bank of America, are the primary beneficiaries of Detroit’s interest rate swaps on the City’s pension obligation certificates, which netted them hundreds of millions in profits on inflated interest payments.
On July 24, two former UBS vice presidents, Gary Heinz and Michael Welty, as well as Peter Ghavami, former UBS global head of commodities, were sentenced to prison terms for deceiving cities and towns by rigging bids to invest municipal bond proceeds. (Reuters, July 24)
A July 12 New York Times article reported: “Phillip D. Murphy, former head of Bank of America’s municipal derivatives desk, was charged with conspiracy to defraud the United States, wire fraud and conspiracy to make false entries in bank records.” The article noted that “13 individuals from banks including Bank of America, JPMorgan Chase and UBS have pleaded guilty in the Justice Department’s investigation. Bank of America, JPMorgan, UBS, Wells Fargo and General Electric have paid more than $700 million in restitution and penalties.”
These are in addition to every major banks’ predatory, fraudulent subprime mortgage lending practices, which resulted in over 100,000 mortgage foreclosures in Detroit from 2005 to the present, and which is the primary cause for the city’s financial crisis.
The Moratorium NOW! Coalition says that because of the criminal fraud the banks have perpetrated on the people of Detroit and the city itself, Detroit should cancel its debt to the banks; the banks owe Detroit billions of dollars for the destruction they have caused. While the coalition intends on challenging the banks’ unclean hands in the bankruptcy proceedings, this issue, like the looting of retired workers’ pensions, will ultimately be decided in the streets.
For more information, contact the Moratorium NOW! Coalition at 313-680-5508 and visit its websites at Moratorium-Mi.org and Detroitdebtmoratorium.org. The coalition meets every Monday at 7 p.m. at 5920 Second Ave., Detroit, MI 48202.