by Tom Stephens
The bankruptcy that Detroit’s dictatorial Emergency Financial Manager has in mind would “put the whole city in hock to Barclays so they can pay off Bank of America and its bankster cohorts.” The scheme goes before judge, this week, in a trial that could set the precedent for wholesale corporate looting of cities across the country, and the end of what’s left of electoral democracy in urban America.
Don’t Let Jones Day Sell Out Detroit!: Rejecting Kevyn Orr’s Dickensian Vision for Our City
by Tom Stephens
“Wall Street sweetheart deal effectively allow Barclays to officially take over the city at any time.”
On Monday, October 21, 2013, in the absence of any more than the most minimal public disclosure and discussion of an issue of such historic and overriding importance to the People and city of Detroit, the Detroit City Council dealt a blow to the greed-fueled plans of Michigan Governor Rick Snyder, Detroit Emergency Manager Kevyn Orr and his employer – Detroit’s “restructuring counsel” Jones Day.
City Council voted unanimously to reject the extortionate financing scheme set up by Orr’s October 11 Emergency Manager Order No. 17. That municipal debt weapon of mass destruction would have turned Detroit into a debtors’ prison for the benefit of Jones Day client Bank of America and the other counter parties to interest rate swaps. Bond Buyer called it the “first deal of its kind.” It would set a dangerous precedent for municipal bankruptcies in the U.S., essentially allowing wealthy big banks to jump to the front of the creditors’ line while retired seniors are facing drastic cuts in the retirement income they depend on.
Emergency Manager Order No. 17 is a dense 18 pages of state-of-the-art municipal finance legalese. It boils down to a few huge transactions. Simplified somewhat for purposes of explanation, it works like this: (If the bankruptcy court approves) 1) The big British finance bank Barclays will loan Detroit $350 million; 2) Detroit will immediately pay the even bigger (Jones Day client) Bank of America/Merrill Lynch and the other Wall Street ‘counterparties’ on interest rate ‘swaps’ $230-250 million; and 3) Barclays will then move to the head of the bankruptcy line, with a "senior secured super-priority Chapter 9 debtor financing" ... "Quality of Life Note" secured by a first-priority lien on every asset Detroit (i.e., Jones Day) sells that is worth more than $10 million. In other words, the Detroit Water & Sewerage Department, as well as anything else they can get their hands on.
“The deal would allow wealthy big banks to jump to the front of the creditors’ line while retired seniors are facing drastic cuts in the retirement income they depend on.”
In essence, Jones Day wants to put the whole city in hock to Barclays so they can pay off Bank of America and its bankster cohorts.
Detroit was to be used as a mere economic pass-thru for $230-250 million received at excessively high interest from British mega-bank Barclays. That money would be paid to the banksters at BoA and their cronies. Barclays would then receive a super-priority security interest on virtually everything of value in Detroit that placed them at the head of the bankruptcy recovery line. As if that weren’t enough of a giveaway, the “Default” provisions of the Jones Day-negotiated Wall Street sweetheart deal effectively allow Barclays (especially with Jones Day/Orr “earning” the other $100 million borrowed on Detroit’s account by “restructuring” Detroit’s local government!) to officially take over the city at any time.
Since Michigan’s emergency management statute PA 436 has abolished democracy, this hot mess still must go before the Governor’s hand puppets on the state emergency loan finance board for the purpose of undoing Council’s act of representative government. More seriously, it also has to be approved by bankruptcy Judge Steven Rhodes. In spite of the rank smell of corruption rising from this deal, Orr’s official mouthpiece Bill Nowling snarled: “Any reasonable person would look at that and say it’s a great deal for the city.”
Nowling’s words call to mind the hateful and contemptuous tone employed by Chares Dickens’ immortal antihero Ebeneezer Scrooge in response to requests for charity during the forthcoming post-Halloween season: “Are there no prisons? And the union workhouses – are they still in operation? I was afraid that something had happened to stop them in their useful course. I help to support the establishments I have named; those who are badly off must go there.”
It would take the great Dickens to adequately portray the characters and issues at play in Detroit today. Ours is a real-life Tale of Two Cities between the downtown/riverfront 7.2 square mile Dan Gilbert-blessed corporate investment zone for unbelievably benevolent white urban adventurers, and the 131 square miles of our neighborhoods our People call “home.”
In the words of Dickens’ masterpiece under that title, “There is prodigious strength in sorrow and despair.” And in Detroit’s neighborhoods outside the newly christened “Midtown.” In our Detroit under Jones Day, as in Dickens’ masterpiece about the French Revolution and the Terror: “Death may beget life, but oppression can beget nothing other than itself.”
“It would take the great Dickens to adequately portray the characters and issues at play in Detroit today.”
When I look at Detroiters today struggling for justice under Kevyn Orr’s authoritarian, one-man corporate-centered rule, like Charles Dickens: “I see a beautiful city and a brilliant people rising from this abyss, and, in their struggles to be truly free, in their triumphs and defeats, through long years to come, I see the evil of this time and of the previous time of which this is the natural birth, gradually making expiation for itself and wearing out...”
The Jones Day Wall Street syndicate operation currently governing Detroit makes what the disgraced and imprisoned Kwame Kilpatrick was doing in Detroit look like schoolyard bullies stealing kids’ milk money! Dickens had a fine message for Snyder, Orr and their phalanxes of $1000/hr corporate shysters seeking to use bankruptcy proceedings as a bludgeon to sell out Detroit to the highest corporate bidders: “Crush humanity out of shape once more, under similar hammers, and it will twist itself into the same tortured forms. Sow the same seeds of rapacious license and oppression over again, and it will surely yield the same fruit according to its kind.”
Finally, Dickens’ words for Detroiters give us perfect perspective on ourselves and our corporate Jones Day overlords: “Remember how strong we are in our happiness, and how weak he is in his misery
Tom Stephens is a people’s lawyer living in Detroit. He can be contacted at j[email protected].