Federal judge rules in favor of banks and political dictatorship in Detroit bankruptcy decision

Dec. 3 — Judge Steven Rhodes has ruled that a state-imposed emergency manager was acting legally when bankruptcy was filed over and above the objections of the people of Detroit. The judge also said that pensions guaranteed under the Michigan constitution could be diminished.

Rhodes stated that even though Kevyn Orr, the emergency manager and a former partner in corporate law firm Jones Day, did not negotiate in good faith with unions, pensioners and creditors, such a process was impractical. There was no recognition or acknowledgment of the role of the banks and the corporations in the financial destruction of the city and its people in today’s eligibility decision.

Republican Gov. Rick Snyder appointed Orr in March against the wishes of city residents and elected officials. Facing widespread opposition to his restructuring policies in the courts and in the streets, Orr filed for bankruptcy in July.

This ruling took place today at the same time as union members, retirees and community activists demonstrated outside the courtroom in downtown Detroit. The protesters carried signs calling for bailing out the people not the banks and in favor of cancelling the bank debt that they say is completely illegitimate.

One community leader, Marian Kramer, co-chair of the Michigan Welfare Rights Organization, told the crowd outside the court, “They’re attacking the pensions of the public employees. Everybody else better start standing up, cause you’re next on the chopping block, because it sets a model for the rest of the country.”

Ruling will affect other cities, ruin people’s lives

The decision has national ramifications for municipalities across the United States facing similar problems in the aftermath of the worst recession since the Great Depression of the 1930s. According to leading financial publications, dozens of states in the U.S. have pension systems that are considered underfunded. The decline of revenue sharing from the states and federal government can only mean more austerity for urban residents.

Since 2008, the banks have been bailed out to the tune of at least $14 trillion while poverty, unemployment and political repression have escalated for the overwhelming majority of working and oppressed people.

David Sole, a retired city employee in the Department of Water and Sewerage and an organizer in the Stop the Theft of Our Pensions Committee, said outside the courtroom after the judge’s decision that the ruling “exposed Rhodes as an agent of Wall Street. Retirees will be driven out of their homes into the streets. We will be living in cardboard boxes if our pensions are cut and health care eliminated. This is the same federal court system that justified slavery for over a hundred years. We cannot expect justice from them.”

Most people in the city of Detroit viewed the bankruptcy proceeding as a foregone conclusion. The right to vote and to collective bargaining has been largely stolen under the guise of a ruling-class response to the economic crisis.

Detroit is the largest per capita African-American-populated city in the U.S. The emergency manager law, which voters turned down in November 2012, has disenfranchised over half of the African-American people in the state of Michigan.

Even though the people voted against emergency management, the right-wing-dominated state legislature immediately passed another law reinstituting political dictatorship on behalf of the banks. In addition to the emergency manager law passed last December, state lawmakers, along with the governor, made Michigan a right-to-work state.

No mention of role of criminal banks and corporations

The economic crisis in Detroit is the product of the restructuring of capitalism over the last six decades. Census reports going back to the 1950s reveal that large-scale capital flight and the loss of jobs and household income have driven down living standards inside the city.

In 1950 Detroit had a population of approximately 1.8 million people. Today there are only 700,000. After the theft of hundreds of thousands of industrial, service, professional and skilled jobs, Detroit was then targeted in the late 1990s and early 2000s for racist predatory lending. Subprime mortgage lending to Detroit residents led to 100,000 home foreclosures. These figures speak volumes in regard to the ravages of capitalist exploitation and national oppression.

Banks and other financial institutions profited immensely from the eradication of neighborhoods through fraudulent loans. City and state officials, along with the federal government, refused to place a moratorium on foreclosures, evictions and utility shutoffs, resulting in the loss of 25 percent of the city’s population between 2000 and 2010 and of corresponding  tax revenue.

City workers and retirees have been blamed consistently by the corporate media for the crisis. This is being done despite the fact that municipal employees have faced massive layoffs and pay cuts over the last decade.

These well-documented facts, however, were not taken into consideration by Judge Rhodes. In line with the right-wing agents of the banks and corporations, the bankruptcy court placed the onus of the crisis on the backs of the workers and oppressed.

During the course of the bankruptcy hearings and trial, more than 100 people filed objections to the proceedings. Pensioners, residents, homeowners and workers outlined for the court why the bankruptcy filing was unjustified and illegal.

The proceeding violated the political will and the right to self-determination of the people of Detroit. After Orr was appointed  emergency manager in March, his former law firm, Jones Day, was given a multimillion-dollar contract to represent the city in the restructuring and bankruptcy.

This was done despite the fact that Jones Day has financial institutions such as Bank of America as its clients. It has been reported in the corporate media that up to $62 million in contracts have been given to outside firms for “consulting fees” to carry out the wholesale robbery of the city and its population.

Lawyers for the American Federation of State, County and Municipal Employees have already filed an appeal of the eligibility ruling. These attorneys will also seek an appeal in the federal Sixth Circuit in an effort to place a stay on the bankruptcy proceedings.

Hypocrisy of bourgeois democracy

Many protesters outside the courtroom were angered because their voices in opposition to emergency management and bankruptcy were completely ignored by Judge Rhodes. People’s attorney Jerome Goldberg, who represented a pensioner in the trial, said that an upcoming hearing on whether a deal drafted by the emergency manager to borrow $350 million from Barclays in order to pay off Bank of America and United Bank of Switzerland for a questionable interest rate swap deal from 2005 will reveal the “true character of the bankruptcy court.”

Goldberg told Workers World, “This decision by the federal court points to the necessity of the retirees mobilizing in the thousands. What’s more important than appealing Rhodes’ decision is to bring people into the streets to oppose this ruling.”

The trial on the Barclays swap deal will begin on Dec.17. The Moratorium NOW! Coalition to Stop Foreclosures, Evictions and Utility Shutoffs is calling for people to demonstrate outside the federal court in opposition to the payoff of Bank of America and UBS. These two financial institutions played a significant role in the mortgage crisis that has plagued Detroit for years.

In a leaflet circulated outside the federal courthouse, the Moratorium NOW! Coalition stated that “Beginning on Dec. 17 there will be a trial to determine if 20 percent of city income tax dollars will be pledged for six years after bankruptcy to make good on this gift to the banks. This trial will determine if Detroit is to remain permanently enslaved by the criminal banks.”

Despite the overwhelming vote in November 2012 against the emergency manager law, the slew of legal challenges to this usurpation of democratic rights, the filing of legal objections and the consistent petitioning and protests, the courts, acting on behalf of the banks, are committed to the blatant violation of the needs and rights of the workers, retirees and residents.

These developments illustrate clearly the failure of capitalism in the present period. Capitalism has proven to be incapable of addressing the economic crisis that has impacted not only Detroit but the U.S. as a whole and indeed the world.

As one organizer said during the rally outside federal court: “This ruling demonstrates the need for a fundamental restructuring of the political, legal and economic system inside the U.S. There is no justice for workers and oppressed people in the courts. Our only victory will come from the court of public opinion crafted in the streets in struggle against the bankers and the bosses.”