Corporatism, Detroit, Emergency Managers — July 24, 2013 at 7:14 pm

Federal judge halts all lawsuits to stop Detroit bankruptcy + Gov. Snyder’s brilliance in the sequence of events


The skids are greased

[Caricature by DonkeyHotey from photos by Anne C. Savage for Eclectablog]

It what can only be described as a clean sweep for Governor Rick Snyder and Detroit Emergency Manager Kevyn Orr, a federal judge halted three separate lawsuits filed in state courts attempting to stop Snyder and Orr from taking Detroit through a bankruptcy. The argument was that the state constitution prohibits the state from taking any action that will impair pension payments to public employees. In Detroit, that’s over 21,000 retirees who rely on their pensions to survive.

The state constitution is pretty clear on this:

Title IX § 24 – Public pension plans and retirement systems, obligation.
The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.

Financial benefits arising on account of service rendered in each fiscal year shall be funded during that year and such funding shall not be used for financing unfunded accrued liabilities.

Nonetheless, U.S. Bankruptcy Court Judge Steven Rhodes said that all three lawsuits are stayed and the decisions regarding whether Detroit’s obligations to these pensioners is constitutionally protected will be handled in the federal bankruptcy court.

“The court has the authority to extend the scope of the stay when necessary and appropriate,” Rhodes said.

A status conference on the case is set for Aug. 2.

In addition, all issues related to bankruptcy “must be decided by the bankruptcy court exclusively,” Rhodes ruled. Rhodes added that nothing in 10th Amendment supports the argument that constitutionality of state’s pension protections must be decided by state courts.

Governor Snyder responded simply “good” and “excellent”.

The next step is for Justice Rhodes to determine if Detroit is actually qualified to file for bankruptcy, something that is, at this point, all but a foregone conclusion.

Governor Snyder, in a complete 180 from his fear-mongering about bankruptcy in the past, is painting Detroit’s bankruptcy as a good choice for the retirees whose retirement checks are at stake. He said that “one of the first things being requested is that the bankruptcy judge appoint someone to represent the retirees, so they have a voice at the table; so they can be heard in an effective fashion.”

I have been in support of Detroit going into bankruptcy because it preserves the local democracy and protects public assets. However, the Snyder administration played this brilliantly. Knowing full well that bankruptcy was the end game despite their protestations otherwise, they replaced the local government first and only after bankruptcy expert Kevyn Orr had assumed control over the city did they actually file the bankruptcy paperwork, effectively keeping him in charge because he IS the government. Had they chosen to go into bankruptcy before an Emergency Manager was put in place, the mayor and city council would still have power. Keep in mind that emails prove that bankruptcy was being discussed well before Orr was hired.

The only hope now is that the voice of the individuals will be heard in court over the money, power, and connections of the wealthy banks and corporations who are also in line to get whatever they can out of Detroit. Given today’s three-fer in favor of Gov. Snyder and Mr. Orr, I’m not optimistic.

If I needed any other reason for pessimism, I got it when I learned that Justice Rhodes will likely be appointing Republican Gerald Rosen to mediate disputes during the bankruptcy proceedings. Rosen, chief district judge of the U.S. District Court for the Eastern District of Michigan, has a long history in Republican politics and supporting Republican candidates. With this move, all the pieces are in place to push through corporatist plans to crush unions, privatize city services, and exploit Detroit’s crisis for those who can make a profit from it. Republicans and corporatists now control pretty much every decision-making gate that there is in this process.