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Archive for the ‘Bankruptcy’ Category

On January 29 Bloomberg reported Bing Races to Beat Michigan Deadline for Union Detroit Deal

Democratic Mayor Dave Bing is racing to wrest concessions from 48 bargaining units to erase a $200 million deficit in the home of General Motors Co. and the cradle of the U.S. auto industry.

Otherwise, the city of 714,000 dominated by Democrats may face a Republican-appointed manager with authority to sell assets and nullify contracts. State Treasurer Andy Dillon has said Detroit will run out of cash by May, and called for concessions by early February.

This week, Bing began firing 1,000 of Detroit’s 11,300 employees. The mayor also proposes a 10 percent cut in payments to vendors and doubling the 1 percent tax on corporations.

Bing, 68, has said the city must trim annual employee benefit and pension costs, which have risen since 2001 to $35,000 per employee from $18,000.

“We are meeting, not daily but more than weekly, and there are sidebar conversations every day,” said Al Garrett, president of AFSCME Council 25, which represents about 3,000 employees. “I’m not sure an emergency manager would be any more Draconian than what the city itself is asking, but it’s a real possibility.”

Deal Reached?

Mayor Bing is taking his script straight from Greece where a deal has been “close” for days, weeks, and now months.

Today’s Bloomberg headline does not match the facts presented. Please consider Detroit Reaches Pact With City Unions to Avoid Takeover, Detroit News Says

Mayor Dave Bing and a majority of city employee unions have reached tentative agreement on concessions aimed at avoiding a state takeover.

“This agreement is the first meaningful step in achieving the necessary concessions and structural changes,” Bing, 68, said via Twitter.

The deal, but no details, was confirmed by Al Garrett, president of AFSCME Council 25. The agreement covers about 6,500 of the city’s about 11,000 employees, not including police and firefighters who have resisted a demand for a 10 percent wage cut, he said.

The city and unions must agree to concessions early this month to avoid state action, such as the appointment of an emergency manager with broad powers to cut spending, said state Treasurer Andy Dillon. Dillon is leading a review of city finances, after a preliminary review found it will run out of cash by May, and that it faces a $200 million operating deficit.

Deal Reached? Really? No, Not Really

According to mayor Bing we have an “agreement”, albeit an agreement with no details, and without covering police or firefighters. What kind of deal is that?

What’s Best for Detroit?

The best thing for Detroit would be if there is no deal, or the state rejects the deal.

Unions are the problem and the solution is to get rid of them entirely. That will not happen under Bing, but it could happen in a state takeover.

Bing is not interested in what’s best for Detroit taxpayers nor is he interested is what’s best for Detroit school children where shockingly only 25% graduate high schools. Rather, Bing is out to save as much of the status quo as he can, including his own job of course.

Detroit Schools Bankrupt

Flashback July 24,2009: The Wall Street Journal reports Detroit’s Schools Are Going Bankrupt, Too

Detroit is like many urban  school districts—large, unwieldy and bureaucratic, with a powerful union  that makes the system unable to adapt to changing circumstances and  that until very recently had an indulgent political class that insulated  it from reform. That insulation came in two forms. The first was  neglect. Mayor Kwame Kilpatrick spent several years distracted by a  scandal stemming from his affair with a staffer. He resigned last year,  pleaded guilty to obstruction of justice, and was sentenced to four  months in jail. Had he been an effective mayor, he might have also been a  powerful advocate for students.

The other insulating force was a  conscious decision to wall off Detroit from charter schools. In 1993,  Michigan’s legislature made it difficult to create new charters in  Detroit by declaring that only community colleges could authorize  charters for primary and secondary schools in “First-Class  Districts”—defined as those with more than 100,000 students. Detroit was  the only First-Class District. In  2003 the state, under pressure from the Detroit Federation of Teachers,  turned down a gift of $200 million from philanthropist Robert Thompson  that would have established 15 charter schools in the city. Those charters are needed today.

The  net result has been a school system that’s been coming apart as the  teachers union has dug in its heels. In 2006, the union illegally went  on strike, killing a plan to force teachers to take a pay cut to balance  the system’s books.

Collective Bargaining has Morally and Fiscally Bankrupted Detroit Schools

Read  that again. Under pressure from the Teachers’ Union, Detroit turned  down $200 Million. That was in 2003 dollars. Wow. No doubt the  union  “did it for the kids“.

For more on the appalling behavior of Detroit’s teachers’ unions please see Detroit Public Schools (25% graduation rate) teachers unions opposing highly qualified volunteer teachers.

It is time to kill collective bargaining for public unions, every one of them, and nation-wide, not just Detroit.
Mike  “Mish”  Shedlock – Global Economic Analysis

I’m Calling for a General Financial Market Strike

First, all notions of personal property rights were essentially destroyed when the MF Global “trustee” began seizing customers’ gold and silver bullion held in storage if that bullion was purchased through contracts brokered by MF Global. In case you’re not following, let me restate. MF Global customers who traded in precious metals and actually took delivery and OWNED bullion, as in outright, free and clear OWNERSHIP, complete with a warehouse receipt (aka title) with SERIAL NUMBERS designating exactly which physical bars they OWNED, and were PAYING RENT to STORE their own property in a “secure” VAULT, complete with statements indicating that these storage fees were paid in full, are having THEIR PROPERTY THAT THEY OWN AND ARE PAYING RENT TO STORE CONFISCATED by the MF Global trustee in order to feed the gaping maw that is the MF Global “estate”.

This would be EXACTLY like if you rented a little storage space at one of the thousands of storage facilities that dot this nation, and stored a car there. I used to do exactly this when I had multiple cars. Imagine the owner of the storage facility went bankrupt. Now imagine that a “trustee” SEIZED YOUR CAR, sold it, and used YOUR PROPERTY to feed the storage franchise owner’s BK. Nevermind that you had an explicit RENTAL AGREEMENT and that you had receipts proving that you were paying monthly rent on said storage space, and that you could produce clear title to the car showing that you owned it, and that the VIN numbers matched.

Do you understand what is happening now? This is outright confiscation of personal property. After having their money stolen out of their accounts and being locked out of their accounts, unable to trade or even liquidate WHILE THE MARKETS CONTINUED TO TRADE, these people are now having their PERSONAL PHYSICAL PROPERTY stolen and redistributed to the MF Global estate, in order to feed Corzine’s gambling debts – MADE ILLEGALLY WITH FUNDS STOLEN OUT OF THE CUSTOMER ACCOUNTS – to repay counterparties with J.P. Morgan at the fore.

So guess what? This is now establishing the precedent that ANY property held by a third party can be seized and confiscated to feed a bankruptcy of said third party. This includes BANK DEPOSITS. Now, please consider that all of the major banks in the United States are insolvent, and insolvent MULTIPLE TIMES OVER. Bank of America, Wells Fargo, Citi, all of them. When these banks collapse – and they WILL collapse – any deposits they are holding WILL BE CONFISCATED and redistributed to their counterparties. Citation URL here at Market-Ticker.org

Oh, but there’s more.

Also announced over the weekend was the jaw-dropping, yet illuminating fact that the MF Global bankruptcy was fraudulently, nefariously and illegally drawn up as a Chapter 7 BK for a SECURITIES DEALER and NOT a commodity brokerage as it should have been. Look, MF Global was the second-largest non-bank FCM in the United States next to NewEdge which is the old FIMAT. If MF Global wasn’t an FCM, then there are no FCMs. Of course it was an FCM. It had $7.2 billion in customer seg funds as of August 31, 2011. And yet MF Global was immediately, from the get-go, put into Chapter 7 BK as a SECURITIES FIRM. This is fraud. MF Global’s BK should have OBVIOUSLY been established under Subchapter IV of the Chapter 7 code as a COMMODITY BROKERAGE.

Why wasn’t this done? Because in a Subchapter IV liquidation of a commodity brokerage firm, guess who is absolutely and unequivocally at the front of the line? You guessed it: the CUSTOMERS. In the Chapter 7 liquidation of a securities firm, guess who goes to the front of the line? Uh-huh. The “creditors”, aka the counterparties on the firm’s proprietary positions. As in . . . J.P. Morgan, et al.

Now we know why this unprecedented action of raping the customers has happened. It was set up that way. Now are you telling me that NO ONE at the CFTC appreciated the difference between the BK subchapters? Are you honestly telling me that Terry Duffy and NO ONE at the CME understood the difference between a securities firm liquidation and a Subchapter IV commodities firm liquidation and the massive consequences to the customers? Not a single one of them understood this massive difference? Bullshit. Of course they knew. They set it up that way from day one. And they continue to know. And this fricking charade just keeps going and going, and the rape and confiscation of the customers’ property continues apace. The fix was in on the customers and J.P. Morgan was put at the front of the line willfully, intentionally and with extreme malice aforethought by all those parties concerned. Citation Hotlink here:

Click Here to read the ZeroHedge reportage.

On Monday morning, October 31, 2011, at 5:20 a.m., I received a telephone call from a representative of the Securities and Exchange Commission’s (“SEC”) Division of Trading and Markets, who was then in New York. The purpose of the call was to inform SIPC that a liquidation proceeding under the Securities Investor Protection Act, 15 U.S.C. §§ 78aaa et seq. (“SIPA”), was necessary with respect to MF Global Inc. (“Debtor”). This call was the first notice to SIPC that such action was required to protect the Debtor’s investors. SIPC subsequently received a formal written notification from the SEC via an e-mail at 7:29 a.m. stating that the commencement of a liquidation proceeding with respect to the Debtor was appropriate under Section 78eee(a)(1) of SIPA, and setting forth the legal and factual basis for commencing the case.

We note there was no call to protect Debtor’s (MFGI) depositors.  In other words customers.  SIPC was notified to protect “investors.”  Assuming this language refers to the less than 400 securities accounts at MFGI, why would this turn into a SIPC liquidation when less than .010% were security accounts subject to SIPC protections and 99.99% of the client accounts were not covered under SIPC?  Role of the CFTC was to step in and protect MFGI customers/depositors.

And this is why I am now formally calling for the financial industry blogging community to officially push for and declare a general market strike. I call for all decent people of good will to withdraw ALL FUNDS from the financial markets and cease to trade in solidarity with the MF Global rape victims until such time as the MF Global BK is properly filed as a Subchapter IV commodity brokerage liquidation and their private property is FULLY RESTORED.

If this is how they’re going to play, I say let’s shut the whole damn thing down. Let’s show these rat bastards how we do things in the Civilized World. Molon Labe.

Ann Barnhardt – Barnhardt Capital Management

Well, here’s something that’s gone mostly unnoticed.  From the FDIC:

Acting chairman stresses that the agency’s own planning is just as important as plans submitted by companies.

Seems that the big banks were asked to submit a sort of ‘plan’ for their own demise.

The Federal Deposit Insurance Corp. on Tuesday approved a rule requiring the nation’s largest banks to submit “living wills” to help regulators shut them down in an orderly way if they are seized on the brink of failure.

And now it appears that the FDIC may not be willing to wait much longer.

Personally, I think we’ve waited long enough.  This country can function just fine without the banks that have committed fraud.  You know, the ones for which the majority of our taxpayer money has been providing life support.  Allowing these banks to fail is probably the best thing that can happen….well, besides the officers and board members of these banks being prosecuted and put in jail.  Then we’d be cooking with gas.

While politicians bicker about debt ceilings and government spending, American families suffer under an increasingly hefty debt load.

There are only two ways to retire debt:  Pay it off….or default.  What is becoming more and more apparent is that Americans’ wages will not sustain the debt load that has been foisted upon them through our government’s inflationary monetary policy.  Prices of things we need continue to increase at a rapid rate while wages are falling precipitously.  In Michigan the median wage has fallen by over $12,000 per year!  At the same time, prices have gone up an average of 4% per year.

It’s pretty clear why more and more people who understand that the math doesn’t work here are advocating for a massive bankruptcy for all of America.

Is the truth gaining currency or is this the patient with lung cancer facing up to the fact that when coughing up half your lung in the morning into the sink you really are screwed?

NEW YORK (MarketWatch) — You want to fix this economic crisis? You want to put people back to work? You want to light a fire under the economy?

There’s a way to do it. Fast. And relatively simple.

But you’re not going to like it. You’re not going to like it at all.

Default. A national Chapter 11 bankruptcy.

The fastest way to fix this mess is to see tens of millions of homeowners default on their mortgages and other debts, and millions more file for bankruptcy.

Yep.

Brett continues….

It’s the debt, stupid.

We’re hocked up to the eyeballs, and then some. We’re at the bottom of a lake of debt, lashed to an anchor. American households today owe $13.3 trillion. That has quadrupled in a generation. It has doubled just in the last 11 years. We owe more than any other nation, ever. And for all the yakking about how people are “repairing their balance sheets,” they’re not. From the peak, four years ago, they’ve cut their debts by a grand total of 4%.

Yep.  Four years into when I’ve been saying that as well.  Of course The Fed Z1 tells the truth although the media has thus far refused to.

American mortgage contracts allow for default. Half of the states in this country are “non-recourse,” which broadly speaking means you can send in the keys and walk away from a bad loan. The other half are sort of “semi-recourse.” The bank can come after you for any shortfall, but only in a limited way. Broadly speaking they can’t touch retirement accounts and basic assets. You can typically keep your car, personal effects, often things like life insurance.

Most of the people who are deeply underwater don’t have that much anyway.

And the banks knew this. When they were lending $500,000 to a bus driver with $1,000 in his checking account, they knew that their loan was only guaranteed by the value of the home.

If they didn’t know it, they should have. Their incompetence is not our problem.

Exactly.

But what’s being missed here is that the banks basically bought the government.  And they keep buying it – both Democrat and Republican.

Thus, my screed over the weekend about how it’s over and that you’re nuts if you in any way help, assist, or play “footsie” with the people in the government any longer.  They don’t give a damn about the math and they sure don’t give a damn about you.

Everything has been about “saving the banks.”  The very same banks who intentionally loaned a guy who had $1,000 in total net worth and a $50,000 a year honest income $500,000 to “buy” a house, knowing full well he couldn’t pay.

They didn’t care because (1) they expected him to come back and refinance, thereby allowing them to asset-strip him further and (2) they fully expected that if something went wrong with (1) they could force you, the taxpayer, to pick up the check.

Unfortunately “you” via the government is the same as “you” the starry-eyed homebuyer with no money.  They both go to the same place and neither has the ability to shoulder any more debt.

We either face this truth, as I have counseled since The Ticker began or we go off the cliff exactly as is happening in Greece right here and now.

Pick one.

We saw it with homes, especially condos, now we see refusal of lenders to take possession of cars and boats following bankruptcy.

Please consider My lender refuses to repossess my car

Dear Bankruptcy Adviser,
I was forced to file Chapter 7 bankruptcy. I agreed to surrender my vehicle. After my Chapter 7 was discharged, I naturally expected my car to be picked up by the lender. It has now been three months. Is there a required amount of time in which they have to pick it up? I have made many calls about this to my lender. Not one call has been returned. Isn’t there something in the law that states they have a time limit to pick up the car, or else release the title to me?– Jim

The “Bankruptcy Adviser” responded that he is seeing this action more frequently because resale value is “so low that the lender doesn’t want to waste resources to repossess, refurbish and resell.”

The BA presented three options.

1. “Keep the vehicle and use it.”
2. “Park the vehicle in a secure, public location and send a copy of the keys via registered mail to the creditor”
3. “Call the lender every 48 hours until you talk someone into picking up the vehicle.”

In regards to option number 2, the BA failed to mention there is  a risk the vehicle is towed and storage charges assessed. That risk is so high and the consequences so great that #2 is not a good option at all.

To be fair, the BA does say “The risk for you here is that you will need to confirm that the car eventually was picked up by the proper entity”, but that warning is not emphatic enough.

My personal suggestion is keep the vehicle and use it, but please make sure it has legally required insurance.

If someone cannot afford the insurance or this was a second, now unneeded car, then option number 3 could be appealing.

I think that upon proper notification, a lender should lose rights to the property if the lender refuses possession.

In the case of cars and boats that would work. However, in the case of condos where homeowner fees, maintenance, insurance, and back taxes may easily total far more than the home is worth, such a law would still not entice banks to take possession.

By the way, are such loans written off as worthless on the balance sheets of banks? I suspect not.

Mike  “Mish”  Shedlock

Global Economic Analysis