Detroit bankruptcy means people versus banks
Federal Bankruptcy Judge Stephen Rhodes heard closing arguments Nov. 8 in the eligibility trial for what could be the largest municipal bankruptcy in U.S. history. The city of Detroit, represented by Jones Day — the law firm of the city’s state-imposed Emergency Manager, Kevyn Orr — attempted to make a case for forcing the majority African-American municipality into bankruptcy, where pensioners’ retirement funds may get only 16 cents on the dollar.
During the course of the preliminary hearings, over 23,000 retirees received letters from Orr’s office saying their health care plans would be terminated by year’s end. Subsequent announcements now give a deadline at the end of February 2014.
The judge will rule whether the city is insolvent and whether the EM conducted “good faith” negotiations with the unions and other creditors prior to filing for bankruptcy. Union attorneys say Orr’s actions have been shrouded in secrecy and that a decision was already made prior to any efforts to discuss the issues with labor leaders and retirees.
Additional hearings will be held on Orr’s plan to pay off a swap deal with Bank of America and United Bank of Switzerland, which, if given the go ahead, will drive the city further into financial ruin. On Oct. 21, the Detroit City Council, where a majority of members have voted consistently with the banks, unanimously rejected the swap deal to be financed by Barclays.
The lame-duck city council is calling for intervention in the bankruptcy proceeding by the Securities and Exchange Commission. The SEC has been involved in numerous criminal investigations, lawsuits and convictions of bankers, including those with banks involved in the destruction of Detroit.
These entities were major holders of fraudulent subprime mortgage notes and municipal loans that drove the city into unsustainable debt. Orr’s office is now claiming Detroit owes up to $22 billion to both secured and unsecured creditors.
The objective of the $350 million Barclays swap deal was to pay off the banks prior to a decision on the Chapter 9 bankruptcy eligibility. No offers have been made or accepted, however, for the obligations owed to pensioners and city employees.
The plan to pay off the banks in this interest rate swap would be guaranteed through casino and income tax revenues. Any city asset worth more than $10 million would also be put up as collateral.
Demonstrate at Bank of America
On Nov. 12, a noon demonstration in front of Bank of America in downtown Detroit will once again place blame for the current crisis on the banks. A united front, including the Moratorium NOW! Coalition to Stop Foreclosures, Evictions & Utility Shutoffs; Detroiters Resisting Emergency Management; and the National Action Network, called the protest.
The demonstration will demand the bankruptcy court reject the swap deal with Barclays, stop the threatened cuts to pensions and health-care programs, and maintain city jobs and public assets.
Whether the bankruptcy is allowed to go forward or not, the attacks on workers, retirees and city residents will continue. Efforts are well underway to further privatize city services and assets.
A Public Lighting Authority has already been established at the state level to take control of the city’s decrepit lighting system. Due to disinvestment from the city by federal and state governments, no real infrastructure improvements have been made in decades.
Independent class struggle needed
Meanwhile, city elections were held Nov. 5 where corporate agent Mike Duggan was elected with less than 25 percent of the electorate participating. Duggan is the first white mayor elected in Detroit since 1969.
Duggan’s campaign and ballot status were subjected to allegations and legal challenges claiming massive fraud. It is obvious to many that Duggan is working closely with the corporate elites in Detroit to continue the process of indebtedness and the denial of fundamental democratic rights to Detroit residents.
The offices of Orr and Duggan, who is slated to take office in January, are providing no real solutions for Detroit’s crisis. There is no mention of the need to cancel the bank debt and to provide jobs and city services for the people.
The people of Detroit have no choice except to continue the movement against the banks and corporations that have driven the city into the present crisis. The outcome of the bankruptcy trial and the overall struggle for jobs, city services, pensions and health care will portend much for the future of other cities around the U.S.
Unless the working class and nationally oppressed communities organize independently of the two major capitalist parties under a program for jobs, economic equality, self-determination and self-rule, conditions for the overwhelming majority of people in the U.S. will worsen. Capitalism and its functionaries have no program to address the crisis other than more austerity and repression domestically, coupled with imperialist war abroad.