Detroiters reject $165 million payout to big banks
Detroit, Jan. 2 — A statement issued Jan. 1 by the Moratorium NOW! Coalition to Stop Foreclosures, Evictions & Utility Shutoffs has put the spotlight on Detroit Emergency Manager Kevyn Orr’s sworn testimony that he was allegedly set to legally challenge Bank of America and United Bank of Switzerland on the grounds of fraud and other counts, but decided not to pursue them.
The Moratorium NOW! Coalition said that at his deposition in the Detroit bankruptcy case on Dec. 31, Orr testified under oath “that he had his attorneys draft a complaint against Bank of America and UBS charging them with fraud, unjust enrichment and breach of contract, among other counts in connection with placing the city of Detroit in interest rate swaps that have cost the city hundreds of millions of dollars since 2006. Orr said he spoke with the U.S. Securities and Exchange Commission about enlisting their aid in investigating these charges. The SEC has brought many similar complaints against the banks for misconduct in the municipal bond market.”
The coalition further stated: “Orr testified that he believed the city’s potential in succeeding in this complaint, which could recover up to $500 million from these banks, was 50-50.
“Pursuing this complaint against the banks would net real revenue to rebuild Detroit’s neighborhoods, which were destroyed by approximately 100,000 foreclosures resulting from the predatory lending practices of the banks,” said Moratorium NOW!
However, Orr said he would not sue Bank of America and UBS and would push for an interest rate swap deal with these banks. This deal will cost the city hundreds of millions of dollars.
The city of Detroit is currently in the early stages of the largest municipal bankruptcy in U.S. history. In what activists call a blatant conflict of interest, Orr comes from the law firm Jones Day, which now represents the city of Detroit as well as Bank of America.
Demand grows louder: ‘Make the banks pay!’
Moratorium NOW! stated:
“Incredibly, instead of pursuing this complaint, Orr is going to the bankruptcy court on Jan. 3 to seek approval of a ‘deal’ that was negotiated the last week of December to pay Bank of America and UBS $165 million plus $4 million in breakage costs to terminate the interest rate swaps, which have already netted the banks about $300 million in profit.
“Orr will also seek approval of a loan from Barclays at interest rates up 8.5 percent to pay this $165 million to UBS and Bank of America, secured by a $48 million per year lien on city income tax revenues for the next four years, which amounts to about 20 percent of all income taxes collected.
“Rather than going after the banks to make them repay the city for the destruction they have caused, Orr is opting to allow the banks to continue their stranglehold over Detroit’s finances, ensuring that services, jobs and pensions will continue to be slashed.”
Organizers with Moratorium NOW! are calling on Detroit activists, workers, retirees and union members to join them in front of the federal courthouse at 231 W. Lafayette St. when the trial on the swaps agreement resumes on Friday morning, Jan. 3. A demonstration will gather at 8:30 a.m. demanding that the illegal bank debt be cancelled and the democratic rights of the people of Detroit be immediately restored. People are also encouraged to pack the courtroom of Judge Steven Rhodes starting at 9 a.m.
Activists have learned that demonstrations in solidarity with the people of Detroit are also being held in New York City; Baltimore; Raleigh, N.C.; and Oakland, Calif.
Only the workers, retirees and community residents of Detroit can reverse the current crisis. Join Detroiters in demanding: Cancel Detroit’s debt! Make the banks pay for the destruction they have caused! Hands off our pensions! Save city services and assets and make the banks fund a jobs program for youth to rebuild our communities!
For more information, visit moratorium-mi.org and detroitdebtmoratorium.org or call 313-680-5508.