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(Chicago Sun-Times)   While Detroit declared bankruptcy, the city of Chicago's bond rating suffered a "triple downgrade" from Moody's, which "you don't usually see [...] unless there is a catastrophic event, such as a natural disaster or terrorist attack"   (suntimes.com) divider line 58
    More: Scary, bond credit rating, Moody, Chicago, fixed costs, rating agency  
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1519 clicks; posted to Business » on 20 Jul 2013 at 1:53 AM (39 weeks ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2013-07-20 12:13:57 AM
For those of you who don't want to register:


The financial day of reckoning for Chicago that Mayor Rahm Emanuel has been warning of finally came Thursday when a Wall Street rating agency ordered a "triple downgrade" of Chicago's all-important bond rating.

Moody's Investors dropped the city's bond rating from Aa3 to A3, citing Chicago's "very large and growing" pension liabilities, high-fixed costs, "unrelenting public safety demands" and "significant" debt load.

"You don't usually see a triple-downgrade unless there is a catastrophic event, such as a natural disaster or terrorist attack," said Civic Federation President Laurence Msall.

"This is a financial hurricane event for Chicago. ... The city's borrowing costs will rise dramatically and their ability to use creative financing is going to be limited because of the costs associated with having such a low rating."

The bond rating at the Chicago Public Schools has dropped repeatedly since Emanuel took office, but Thursday's triple-drop was the first impacting the city's bond rating.

"The current administration has made efforts to reduce costs and achieve operational efficiencies, but the magnitude of the city's pension obligations has precluded any meaningful financial improvements," Moody's wrote

Emanuel responded by essentially saying, "I told you so."


"This confirms what I have been saying for more than a year. Without comprehensive pension relief from Springfield, municipalities such as Chicago will continue to receive negative reviews from rating agencies," he said in a statement.

"I have used every tool available to tackle and reform government, strengthen our financial position, and invest in our City's future.  But the pension crisis that is nearing our doorstep puts all of those investments at risk.  I urge our leaders to come together, find common ground, and pass pension relief that will give taxpayers, retirees, residents, and rating agencies confidence in our City's finances and our City's future."

In a telephone interview later Thursday, members of Moody's public finance team called the triple-drop in Chicago's bond rating the "most significant" for a major U.S. city in recent memory.

"We adopted a series of adjustments in April to the way we reported pension data and incorporated it. This review is the first under the updated approach and one of the drivers for the multi-notch action," said Moody's analyst Tom Aaron.

"We identified the city of Chicago as an outlier due to the size of the liability and available resources."

Pressed on what actions Emanuel could take on his own to reverse the precipitous ratings decline, Moody's managing director Jack Dorer said, "We're not here to tell anybody what to do."

But Rachel Cortez, Moody's vice president of public finance, said, "What the city is able to control is raising revenue. Chicago is a home-rule entity. They have very, very broad - nearly unlimited ability to raise property and sales taxes. Whether that would be politically possible [is another matter]. But legally, the mayor and the City Council can raise the revenue."

She added, "On the expenditure side, because the city has not been contributing at actuarily determined annual contribution levels over at least the past decade, the liabilities have grown to the point where any reduction in costs would have to require the state legislature to decrease benefits for current participants. The liability has just grown enormous."

At A3, Chicago's general obligation debt remains investment grade. But the lower rating impacts $8.2 billion in debt and means Chicago taxpayers will pay higher interest rates to borrow money.

Even more ominous is Moody's "negative outlook" for Chicago's future ratings because of what the agency calls "formidable legal and political barriers" to pension reform that can only be approved by the General Assembly.

In its report, Moody's noted that Chicago closed the books on 2012 with $231 million in general fund reserves and $625 million in "leased asset reserves" generated by former Mayor Richard M. Daley's decision to privatize the Chicago Skyway and Chicago parking meters.

Had the city fully funded its $1.5 billion "actuarially required contribution" to the four city employee pension funds in 2012 alone, "these two reserves would have been entirely depleted," Moody's said.

Moody's noted that in 2015 the city is required by state law to make a $600 million contribution to stabilize police and fire pension funds and start them on the road to 90 percent funding. Exacerbating the problem is the "prior and current administration's unwillingness to avail itself of its full taxing authority to stave off burgeoning pension liabilities," the Moody's report states.

Fixed costs, which Moody's identified as pension contributions and debt service - may soon swallow more than 50 percent of Chicago's operating budget.

"To be sure, it would be extremely politically difficult to double property taxes, which is our estimate of what would be required to fully fund" the pension plans, Moody's wrote.

"[But] whether the restriction on raising property taxes is legal, political or practical, any barriers to increasing operating revenues to fund pensions are credit negatives for bond holders."

The rating agency noted that "any meaningful reduction in pension costs would need to apply to existing plan participants," but the Illinois Constitution states that pension benefits for existing employees "shall not be diminished or impaired."

The report states, "Neither the formidable legal barriers to reducing pensions costs nor the political reluctance to raising taxes augers well for the health of the city's four pension plans."

Last year, Emanuel blindsided and infuriated union leaders whose collaboration he had promised to seek to solve the pension crisis.

Instead of negotiating first with union leaders in Chicago, he went to Springfield to lower the boom. The following day, he sent a letter to city employees to soften the blow of the bitter pill he's asking them to swallow: a 10-year freeze in cost-of-living increases for retirees; a five-year increase in the retirement age; a 5 percent increase in employee contributions and a two-tiered pension system for new and old employees.

Labor leaders accused the mayor of pitting hardworking employees against taxpayers by portraying a 150 percent increase in property taxes as the only alternative to employee concessions.

In the end, Chicago's pension crisis was put off along with state's $83 billion pension problem as lawmakers continued to grapple with rival plans championed by House Speaker Michael Madigan and Senate President John Cullerton, both Chicago Democrats.

That continued stalemate has prompted Gov. Pat Quinn to withhold the salaries of state lawmakers until the fiscal time bomb is diffused.

Earlier this year, Emanuel took the bold step of phasing out Chicago's 55 percent subsidy for retiree health care by January 2017 while continuing that coverage for the oldest retirees.

The plan will free taxpayers from a $108.7-million-a-year burden. Some 30,000 retired city employees will be forced to switch to Obamacare.

"That is very commendable work with a significant impact, but the rating agencies are saying that pales in compare to the risk that the state of Illinois is not going to address pension reform and the city won't be able to continue operating these funds," Msall said.


"If they don't [solve the crisis], the rating agencies will further downgrade Chicago and, eventually, we'll lose the ability to borrow money necessary to operate the city. The city needs to borrow money not just for capital needs, but to make up for lags in revenue collection and the general operation of city government."
 
2013-07-20 12:21:52 AM
Have to imagine that the Chicago politicians, public workers, and retirees are watching Detroit very, very carefully right about now to see which way the winds blow in BK court.
 
2013-07-20 12:27:59 AM

remus: Have to imagine that the Chicago politicians, public workers, and retirees are watching Detroit very, very carefully right about now to see which way the winds blow in BK court.


Not really.  Illinois is a different animal.  The state Constitution, for some reason, bars public worker pensions from ever being diminished.  It would be interesting to see how a bankruptcy court would handle that, being that they're part of the federal court system.  Each year a larger and larger chunk of the pie gets set aside for retired workers, and Illinois (Chicago especially) is already one of the most heavily taxed places in the country.
 
2013-07-20 12:37:42 AM
People still trust the rating agencies? Didn't they give worthless mortgage backed securities AAA ratings before the crash?
 
2013-07-20 12:38:45 AM

Fark It: remus: Have to imagine that the Chicago politicians, public workers, and retirees are watching Detroit very, very carefully right about now to see which way the winds blow in BK court.

Not really.  Illinois is a different animal.  The state Constitution, for some reason, bars public worker pensions from ever being diminished.  It would be interesting to see how a bankruptcy court would handle that, being that they're part of the federal court system.  Each year a larger and larger chunk of the pie gets set aside for retired workers, and Illinois (Chicago especially) is already one of the most heavily taxed places in the country.


That's all well and fine, but what do they plan to do when the State checkbook is empty?  Those pensions are underfunded and won't be cured anytime soon (if ever).  They can hide behind the State Constitution, but as Cersei would say "Is this meant to be your shield, my lord? "
 
2013-07-20 12:49:50 AM

remus: Fark It: remus: Have to imagine that the Chicago politicians, public workers, and retirees are watching Detroit very, very carefully right about now to see which way the winds blow in BK court.

Not really.  Illinois is a different animal.  The state Constitution, for some reason, bars public worker pensions from ever being diminished.  It would be interesting to see how a bankruptcy court would handle that, being that they're part of the federal court system.  Each year a larger and larger chunk of the pie gets set aside for retired workers, and Illinois (Chicago especially) is already one of the most heavily taxed places in the country.

That's all well and fine, but what do they plan to do when the State checkbook is empty?  Those pensions are underfunded and won't be cured anytime soon (if ever).  They can hide behind the State Constitution, but as Cersei would say "Is this meant to be your shield, my lord? "


Unless you paid cash for your house, your mortgage is an unfunded liability. Unless you paid cash for your car, your auto loan is an unfunded liability. It's past time for Detroit to raise taxes and sell assets. The median pension for a Detroit cop is $28,000/year. That pension costs each of Detroit's citizens $0.04/year. If Detroit won't raise taxes to cover $0.04 per year, then their motive is not to balance the books, but is rather to break the unions.
 
2013-07-20 12:59:39 AM

Notabunny: The median pension for a Detroit cop is $28,000/year...


Geez. I'll bet that I would have stayed on topic if I'd stayed at a Holiday Inn Express last night
 
2013-07-20 12:59:53 AM

Notabunny: remus: Fark It: remus: Have to imagine that the Chicago politicians, public workers, and retirees are watching Detroit very, very carefully right about now to see which way the winds blow in BK court.

Not really.  Illinois is a different animal.  The state Constitution, for some reason, bars public worker pensions from ever being diminished.  It would be interesting to see how a bankruptcy court would handle that, being that they're part of the federal court system.  Each year a larger and larger chunk of the pie gets set aside for retired workers, and Illinois (Chicago especially) is already one of the most heavily taxed places in the country.

That's all well and fine, but what do they plan to do when the State checkbook is empty?  Those pensions are underfunded and won't be cured anytime soon (if ever).  They can hide behind the State Constitution, but as Cersei would say "Is this meant to be your shield, my lord? "

Unless you paid cash for your house, your mortgage is an unfunded liability. Unless you paid cash for your car, your auto loan is an unfunded liability. It's past time for Detroit to raise taxes and sell assets. The median pension for a Detroit cop is $28,000/year. That pension costs each of Detroit's citizens $0.04/year. If Detroit won't raise taxes to cover $0.04 per year, then their motive is not to balance the books, but is rather to break the unions.


If I don't pay my house payment, they toss me out on my arse and it only affects me.  If the Gov't doesn't fund their pensions as they are supposed to do, then real people get hurt.

If they were a private company, there are laws that require they do the math and put X dollars into an account every year.  They would also be required to have some bean counter check those funds against their obligations and certify they are in good shape.  Detroit, Chicago, etc. have been ignoring those types of laws and practices and putting nothing (or very little) into the bank to fund the outyears on those pensions.   In fact, they have used what was in those funds to pay for current expenses.  Now it's coming home to roost and they are in trouble.

As for raising their taxes, good luck.  Detroit could 100% tax what's left of their citizens and still not be able to pay for their pensions. (plus the people would leave in even faster droves).  It's a good plan if you own a U-Haul franchise in the city.
 
2013-07-20 01:07:57 AM

Notabunny: The median pension for a Detroit cop is $28,000/year. That pension costs each of Detroit's citizens $0.04/year. If Detroit won't raise taxes to cover $0.04 per year, then their motive is not to balance the books, but is rather to break the unions.


Well, $.04 a year isn't that bad.  It's a good thing they only have to pay for one retired cop....
 
2013-07-20 01:17:59 AM
Do you see what happens, Rahm? Do you see what happens when you fark Chick-Fil-A in the ass?
 
2013-07-20 01:18:49 AM

Notabunny: remus: Fark It: remus: Have to imagine that the Chicago politicians, public workers, and retirees are watching Detroit very, very carefully right about now to see which way the winds blow in BK court.

Not really.  Illinois is a different animal.  The state Constitution, for some reason, bars public worker pensions from ever being diminished.  It would be interesting to see how a bankruptcy court would handle that, being that they're part of the federal court system.  Each year a larger and larger chunk of the pie gets set aside for retired workers, and Illinois (Chicago especially) is already one of the most heavily taxed places in the country.

That's all well and fine, but what do they plan to do when the State checkbook is empty?  Those pensions are underfunded and won't be cured anytime soon (if ever).  They can hide behind the State Constitution, but as Cersei would say "Is this meant to be your shield, my lord? "

Unless you paid cash for your house, your mortgage is an unfunded liability. Unless you paid cash for your car, your auto loan is an unfunded liability. It's past time for Detroit to raise taxes and sell assets. The median pension for a Detroit cop is $28,000/year. That pension costs each of Detroit's citizens $0.04/year. If Detroit won't raise taxes to cover $0.04 per year, then their motive is not to balance the books, but is rather to break the unions.


You propose raising taxes on a economically devastated city? Are you insane?
 
2013-07-20 01:30:02 AM

cman: Notabunny: remus: Fark It: remus: Have to imagine that the Chicago politicians, public workers, and retirees are watching Detroit very, very carefully right about now to see which way the winds blow in BK court.

Not really.  Illinois is a different animal.  The state Constitution, for some reason, bars public worker pensions from ever being diminished.  It would be interesting to see how a bankruptcy court would handle that, being that they're part of the federal court system.  Each year a larger and larger chunk of the pie gets set aside for retired workers, and Illinois (Chicago especially) is already one of the most heavily taxed places in the country.

That's all well and fine, but what do they plan to do when the State checkbook is empty?  Those pensions are underfunded and won't be cured anytime soon (if ever).  They can hide behind the State Constitution, but as Cersei would say "Is this meant to be your shield, my lord? "

Unless you paid cash for your house, your mortgage is an unfunded liability. Unless you paid cash for your car, your auto loan is an unfunded liability. It's past time for Detroit to raise taxes and sell assets. The median pension for a Detroit cop is $28,000/year. That pension costs each of Detroit's citizens $0.04/year. If Detroit won't raise taxes to cover $0.04 per year, then their motive is not to balance the books, but is rather to break the unions.

You propose raising taxes on a economically devastated city? Are you insane?


Both raise taxes and sell assets. First they'll have to prove they can't pay their bills, and then wait until after the federal judge approves their Chapter 9 filing. Then, after they've rooked their creditors, they can raise sales taxes and sell assets in order to honer their employee contracts.
 
2013-07-20 01:43:43 AM

themindiswatching: People still trust the rating agencies? Didn't they give worthless mortgage backed securities AAA ratings before the crash?


This,  Fark Moody's.  Fark them where they breathe.
 
2013-07-20 01:58:42 AM
It also happens when the employees of the rating agency can make themselves a profit in full knowledge the powers that be a too feeble to touch them. Or the day ends in with a y.
 
2013-07-20 02:02:25 AM

Fark It: Well, $.04 a year isn't that bad. It's a good thing they only have to pay for one retired cop....


He's the only one who escaped the usual fate of cops approaching retirement.
imgs.xkcd.com
 
2013-07-20 02:32:53 AM

themindiswatching: People still trust the rating agencies? Didn't they give worthless mortgage backed securities AAA ratings before the crash?


This. Moody's is actually still a defendant in a ton of lawsuits over their ratings practices, last I checked.
 
2013-07-20 03:07:49 AM

Fark It: remus: Have to imagine that the Chicago politicians, public workers, and retirees are watching Detroit very, very carefully right about now to see which way the winds blow in BK court.

Not really.  Illinois is a different animal.  The state Constitution, for some reason, bars public worker pensions from ever being diminished.  It would be interesting to see how a bankruptcy court would handle that, being that they're part of the federal court system.  Each year a larger and larger chunk of the pie gets set aside for retired workers, and Illinois (Chicago especially) is already one of the most heavily taxed places in the country.


That, and Illinois doesn't have an ALEC problem like Michigan, Wisconsin, Indiana, and (to a lesser extent) Ohio.

Interesting to see ALEC's impatience in trying to make Delta City out of Detroit.  Then again, ALEC's representative Snyder (and his Detroit-betraying, PR-friendly choice of an Emergency Manager Kevin Orr) does make for a passable Omnicorp executive that's one malfunctioning ED-209 short.
 
2013-07-20 03:09:01 AM
I'm a fiercely liberal guy, but I'm not sure I agree with pensioners getting cost of living raises every year. Maybe a set increase every five years or ten years, but ideally, you should have some safe investments of your own to help supplement your retirement expenses as you age.

Don't know how much that would save them, but it would certainly be better than going bankrupt or some of the other options on the table.
 
2013-07-20 03:13:32 AM

cman: Notabunny: remus: Fark It: remus: Have to imagine that the Chicago politicians, public workers, and retirees are watching Detroit very, very carefully right about now to see which way the winds blow in BK court.

Not really.  Illinois is a different animal.  The state Constitution, for some reason, bars public worker pensions from ever being diminished.  It would be interesting to see how a bankruptcy court would handle that, being that they're part of the federal court system.  Each year a larger and larger chunk of the pie gets set aside for retired workers, and Illinois (Chicago especially) is already one of the most heavily taxed places in the country.

That's all well and fine, but what do they plan to do when the State checkbook is empty?  Those pensions are underfunded and won't be cured anytime soon (if ever).  They can hide behind the State Constitution, but as Cersei would say "Is this meant to be your shield, my lord? "

Unless you paid cash for your house, your mortgage is an unfunded liability. Unless you paid cash for your car, your auto loan is an unfunded liability. It's past time for Detroit to raise taxes and sell assets. The median pension for a Detroit cop is $28,000/year. That pension costs each of Detroit's citizens $0.04/year. If Detroit won't raise taxes to cover $0.04 per year, then their motive is not to balance the books, but is rather to break the unions.

You propose raising taxes on a economically devastated city? Are you insane?


Then how about breaking ALEC's (and the Mackinac Institue) hold on Lansing first before anything happens to Detroit.  Y'know, get rid of someone that only wants to destroy Detroit's remaining existence for the symbolic value.
 
2013-07-20 03:17:23 AM

Pimparoo: I'm a fiercely liberal guy, but I'm not sure I agree with pensioners getting cost of living raises every year. Maybe a set increase every five years or ten years, but ideally, you should have some safe investments of your own to help supplement your retirement expenses as you age.

Don't know how much that would save them, but it would certainly be better than going bankrupt or some of the other options on the table.


Stop tearing people down!  Just because you haven't gotten for yourself what the unions have worked and fought hard for doesn't mean you should drag everybody down!  You're just jealous and you hate unions!

/said the partisan lemmings to anybody who ever dares question the unimpeachable, selfless union workers and the wisdom of letting them run the Democratic Party the way the Chamber of Commerce and private industry runs the GOP
//corporations are made up of people too, just like the unions....
 
2013-07-20 03:27:30 AM

Ivo Shandor: Fark It: Well, $.04 a year isn't that bad. It's a good thing they only have to pay for one retired cop....

He's the only one who escaped the usual fate of cops approaching retirement.
[imgs.xkcd.com image 276x360]


If they even make it to retirement.  Some of them get overheated and pay the ultimate price.  Six-figure, tax-free paydays with no strings attached.

http://www.suntimes.com/news/watchdogs/13688838-452/10-days-in-the-p ol ice-academy-15-years-on-disability.html

http://www.suntimes.com/13688828-761/disability-pays-a-sun-times-inv es tigation.html

Such compassion on the part of the taxpayers.  It shows in how the police treat disabled people in the city.

/blow your lame cartoon out of your ass
 
2013-07-20 03:28:20 AM

MorrisBird: themindiswatching: People still trust the rating agencies? Didn't they give worthless mortgage backed securities AAA ratings before the crash?

This,  Fark Moody's.  Fark them where they breathe.


The the rating agencies have been criticized for over rating state and municipal debt just as they over rated mortgage backed securities. The scary thing is that when the rating agencies started to admit that things were farked up with mortgage backed debt, it was one of the major triggers of the debt crises. We may look back at this event as the start to the next crash.

If you look at the total unfunded and underfunded liabilities for all the municipalities and states combined you get into some truely shocking numbers.
 
2013-07-20 03:53:21 AM
Chicago should create their own bank modeled on the Bank of North Dakota. They can use city property as collateral and fractional reserve banking to create money for low interest loans. All the city's banking needs could be handled by the city-owned bank and the profits fed back into the city's coffers.
 
2013-07-20 05:11:12 AM

HotWingAgenda: themindiswatching: People still trust the rating agencies? Didn't they give worthless mortgage backed securities AAA ratings before the crash?

This. Moody's is actually still a defendant in a ton of lawsuits over their ratings practices, last I checked.


Well, it's not like lenders can just stop using rating agencies.

Even if the agencies just make up the ratings.  It's necessary bullshiat.
 
2013-07-20 06:48:55 AM
Hmm, bonds from massive, over rated cities might not be the safest investments? Color me shocked.
 
2013-07-20 07:22:03 AM
Sounds like the next racket to get out of paying people what they've earned. Good-bye pensions.
 
2013-07-20 08:43:54 AM

Fark It: remus: Have to imagine that the Chicago politicians, public workers, and retirees are watching Detroit very, very carefully right about now to see which way the winds blow in BK court.

Not really.  Illinois is a different animal.  The state Constitution, for some reason, bars public worker pensions from ever being diminished.  It would be interesting to see how a bankruptcy court would handle that, being that they're part of the federal court system.  Each year a larger and larger chunk of the pie gets set aside for retired workers, and Illinois (Chicago especially) is already one of the most heavily taxed places in the country.


Except the MI constitution also forbids the reduction of pensions. The MI state judge declared the bk filing by Detroit in violation of the MI constitution.

It will be interesting to see how the Supremacy Clause, state constitution, automatic stay in bk and Rooker-Feldman play out in this case.

/why yes I am a lawyer and I do practice bk law.
//no I have nothing to do w the Detroit bk filing.
 
2013-07-20 09:41:22 AM

themindiswatching: People still trust the rating agencies? Didn't they give worthless mortgage backed securities AAA ratings before the crash?


The fact that this wasn't three separate downgrades over the past few years should tell you all you need to know about the reliability of the ratings agencies and the quality of their analyses.
 
2013-07-20 09:59:34 AM
"You don't usually see a triple-downgrade unless there is a catastrophic event, such as a natural disaster or terrorist attack,"

Or maybe something like Detroit filing for bankruptcy.  The first one is hard, after that it just gets easier.  The downgrade simply reflects that Chicago's finances suck and it's no longer total anathema for a major city to default.

And if you don't agree, hey, buy Chicago bonds they're now high-interest low-risk in your mind.
 
2013-07-20 10:08:25 AM
The solution is to put the entire population of Detroit into for profit debtors prisons in Chicago.  win win
 
2013-07-20 10:16:43 AM

Mr Rogers is aroused: Pimparoo: I'm a fiercely liberal guy, but I'm not sure I agree with pensioners getting cost of living raises every year. Maybe a set increase every five years or ten years, but ideally, you should have some safe investments of your own to help supplement your retirement expenses as you age.

Don't know how much that would save them, but it would certainly be better than going bankrupt or some of the other options on the table.

I'm a 30 year old guy.  What's a pension?


One of your liabilities.
 
2013-07-20 10:46:29 AM
Detriot and Chicago both have massive suburbs that get all the benefits of city stuff but aren't bound by county or municipal taxes. And no one has the stones to propose a change to that because the harpies will scream bloody hell.
 
jgi
2013-07-20 11:09:51 AM

Mr Rogers is aroused: Good thing I incorporated my legal name into an LLC.  My life, and 3 small business endeavors, is a write-off.  My taxable income is next to nothing.  I'll be damned if I toil for the arseholes who left the world in ruin.   Thank you by MTKO is the theme song to my life.


Your newsletter sounds intriguing. Please elaborate, especially about Your Life LLC. I'm about to convert my business from a partnership to either an LLC or an S-Corp -- both my accountant and a lawyer I know push for S-Corps for tax reasons (something about avoiding a double tax?), but I'm still learning. Any insight or interesting links would be greatly appreciated.
 
2013-07-20 11:14:35 AM
The solution is obvious.

The state government needs to force Three Floyds to export outside the state.  Maryland, specifically.

My drinking problem alone should be enough to move that rating back up a notch.
 
2013-07-20 11:24:36 AM

themindiswatching: People still trust the rating agencies? Didn't they give worthless mortgage backed securities AAA ratings before the crash?


Yeah, but in their defense, they never thought people really took them seriously.
 
2013-07-20 11:29:37 AM

Mr Rogers is aroused: Snarcoleptic_Hoosier: Detriot and Chicago both have massive suburbs that get all the benefits of city stuff but aren't bound by county or municipal taxes. And no one has the stones to propose a change to that because the harpies will scream bloody hell.

pensions aren't city stuff.  Pensions are the problem.  You've got a workforce that has stopped producing (retired) yet is still on the books as an expense.  This system was fine when the revenue was there, and the population cycled proportionately (near equal deaths and new hires).  Now that the population is out of control, people are living longer, and the creative accounting projections are being exposed as unsustainable, the gig is up.

So, the question remains;  how do you cancel everyones' pensions, or greatly reduce them, without creating a civil war?  Or is that the point of the hyper-militarization of our domestic police force?  Have the fat cats known for years that pensions and unions are killing america's competiveness in the new global market?  Are they gearing up for the civil unrest that will result when the dolts finally realize that they're going to have to work until they die or live with their kids?

I hate globalism.  But we owe so much to the likes of china that we have to participate to avoid WWIII.  A default on our status as the reserve currency seems all but inevitable.  When we lose that status, we lose our ability to print money at will.  THATS WHEN THE SHIAT HITS THE FAN.  This pension stuff is just a taste of our future.

/VOTE OUT THE INCUMBENTS.  MAKE A STAND IN THE ONLY WAY YOU CAN!


Pensions are not the problem, it's that the city "forgot" to put away money to pay for the pensions as the employees earned them.

Maybe Chicago can sell of their parking meters to a Middle East company?

/seriously, I think they will use pensions as an excuse to sell off more city property to big business
 
2013-07-20 11:31:01 AM

remus: Have to imagine that the Chicago politicians, public workers, and retirees are watching Detroit very, very carefully right about now to see which way the winds blow in BK court.


Is there ANY big city in America where this doesn't apply?
 
2013-07-20 11:31:48 AM
The angst over the Illinois pensions is predicated on every state worker retiring on the same day. This is never going to happen. Years ago governor Jim Edgar signed a deal that set an unrealistic level of pension funding, with the equivalent of a huge balloon payment in the "ramp" of the payment schedule; servicing that impractical "ramp" is the problem.

And yes, fark Moody's, and all the ratings agencies: they are really no better than outfit extortion gangs, except they get their power from people believing in them.
 
2013-07-20 12:05:01 PM

HempHead: Mr Rogers is aroused: Pensions are the problem.  

Pensions are not the problem, it's that the city "forgot" to put away money to pay for the pensions as the employees earned them.


Bingo! Unfunded retiree benefits are the real culprit, and most municipalities and states are guilty of this particular fraud. If local and state governments actually paid into these accounts what was owed as it was owed, we would not be in this situation. It's like continuing to run up your credit cards even after you know you can't pay them off.

I was listening to Marketplace on NPR yesterday and the guest stated that there are $6 Trillion in unfunded retiree benefits (pension and health care) by municipalities alone in America, not counting the state workers. The states owe another several Trillion. My guess is that the USG is going to have to start bailing out state and local governments the way they did the banks and auto firms...just keep the printing presses running 24/7.

Japan has been in this situation for 20-30 years. Their government keeps printing money to pay off old obligations, to ensure everyone has enough income to live on and to keep commercial money cheap. We'll end up doing the same thing to prevent social unrest. As long as real productivity gains outpace money printing the business community won't complain. You'll have enough money to live off of, frugally, but we'll stave off economic collapse.
 
2013-07-20 12:42:15 PM

themindiswatching: People still trust the rating agencies? Didn't they give worthless mortgage backed securities AAA ratings before the crash?


People still trust our government to manage their funds?

Not real people. Just useful idiots like you.
 
2013-07-20 12:44:19 PM
All those stupid Republican Chicago mayors did this!
 
2013-07-20 01:10:19 PM

Nemo's Brother: All those stupid Republican Chicago mayors did this!


And all those dumbass Alabama Democrats caused the largest Chapter 9 bankruptcy prior to Detroit, and all those OC Democrats caused the largest one before that.
 
2013-07-20 01:46:49 PM

born_yesterday: The solution is obvious.

The state government needs to force Three Floyds to export outside the state.  Maryland, specifically.

My drinking problem alone should be enough to move that rating back up a notch.


Um, the 3 Floyd's brewery is in Munster, INDIANA
 
2013-07-20 01:55:37 PM

Stone Meadow: HempHead: Mr Rogers is aroused: Pensions are the problem.  

Pensions are not the problem, it's that the city "forgot" to put away money to pay for the pensions as the employees earned them.

Bingo! Unfunded retiree benefits are the real culprit, and most municipalities and states are guilty of this particular fraud. If local and state governments actually paid into these accounts what was owed as it was owed, we would not be in this situation. It's like continuing to run up your credit cards even after you know you can't pay them off.

I was listening to Marketplace on NPR yesterday and the guest stated that there are $6 Trillion in unfunded retiree benefits (pension and health care) by municipalities alone in America, not counting the state workers. The states owe another several Trillion. My guess is that the USG is going to have to start bailing out state and local governments the way they did the banks and auto firms...just keep the printing presses running 24/7.

Japan has been in this situation for 20-30 years. Their government keeps printing money to pay off old obligations, to ensure everyone has enough income to live on and to keep commercial money cheap. We'll end up doing the same thing to prevent social unrest. As long as real productivity gains outpace money printing the business community won't complain. You'll have enough money to live off of, frugally, but we'll stave off economic collapse.


so much this. the NYC public unions and politicians have done a great job ensuring that the city makes its annual pension contribution payments, despite city workers generally not having contracts for the past seven years.

that $137 billion city pension system? completely funded, and producing 12% annual returns
 
2013-07-20 02:09:19 PM
I'm sure the Republicans are to blame for this, somehow.
 
2013-07-20 02:14:02 PM
Chicago is a lot better than Detroit because people are actually moving there and Chicago isn't suffering a major population loss. If Chicago was Detroit, Chicago would have a population of around 1.4 million.
 
2013-07-20 02:15:54 PM

Fark It: For those of you who don't want to register:
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Thank you.

Was considering a job in Chicago, working for the city.  Backed off because a) It's Chicago, so it was probably a nepotism hire anyway,  b) news stories I read about Chicago's financial and pension troubles actually sound worse than LA's, which is hard to do and c) they require you to live in the actual City of Chicago, which seemed utterly wierd and controlling to me.  My personal life is my personal life, City of Chicago.

Good salary and pension.  Who knows how long that job would have lasted, though.
 
jgi
2013-07-20 02:28:21 PM

MartinaMcSorley: Fark It: For those of you who don't want to register:
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Thank you.

Was considering a job in Chicago, working for the city.  Backed off because a) It's Chicago, so it was probably a nepotism hire anyway,  b) news stories I read about Chicago's financial and pension troubles actually sound worse than LA's, which is hard to do and c) they require you to live in the actual City of Chicago, which seemed utterly wierd and controlling to me.  My personal life is my personal life, City of Chicago.

Good salary and pension.  Who knows how long that job would have lasted, though.


I live in Chicago and it's actually a pretty great place. The best part about it is that it's a world class city, with lower costs of living than all of the other world class cities I've lived in. Most of the violent crime you hear of about is gangs shooting gangs, but I admit that nobody here is immune. But that's just a fact of big city life. The winters suck, and the summers (like right now) can get incredibly hot and humid, but it's nice to have all the seasons. It's quite a large city and the neighborhoods are spread out which translates to having some space. When I lived in NYC, I had no space. Here I have a ton for a fraction of the price. Sure, it ain't the suburbs but the suburbs just aren't my thing. I like not needing a car (though I do have a "beater" city car), I've got ZipCar, great mass transit, and rentals for when I go out of town.

I was skeptical when I first moved here but now I love it. Lake Michigan isn't an ocean, I hate the Loop (probably because I work there), and Rahm is douche, but there's so much to do and see here. It's a city at a slower speed, which I appreciate it. Overall, an exciting and fun place to live.
 
2013-07-20 02:38:02 PM

Pimparoo: I'm a fiercely liberal guy, but I'm not sure I agree with pensioners getting cost of living raises every year. Maybe a set increase every five years or ten years, but ideally, you should have some safe investments of your own to help supplement your retirement expenses as you age.

Don't know how much that would save them, but it would certainly be better than going bankrupt or some of the other options on the table.


That is fine in principal.but these guys worked for 30+ years with the knowledge that in retirement would be looked after.now you are suggesting changing the deal, because they should have known all it would go tits up and saved?
 
2013-07-20 03:02:53 PM

jgi: ave a ton for a fraction of the price. Sure, it a


Yeah, it looked like there were real nice neighborhoods, when I was trolling on Trulia for houses in the actual City of Chicago.  Lots of attractive old brick veneer things with nifty architectural details, custom windows and hardwood floors.  And for someone from Los Angeles, delightfully affordable.  But the lots seemed small - I've got a dog that needs to run, and I don't know how she'd manage on a 3000 square foot.  Or less.  She'd go nuts and destroy the lovely floors and moldings, that's what would happen.  =)    Chicago looks like an abaolutely great town.  I've never seen any of the Great Lakes - a lake that you can't see across would blow me away.  And of course the food is world-famous.  And public transit that is actually a *thing*.  I could do Chicago, I think.  But not that job.  They removed the job posting the day it was scheduled to come down, so my guess about having someone all ready slide in there was probably correct.

And yeah, Rahm Emmanuel seems like a major douchebag.  I've been putting up with Villairagosa in LA for 8 years.  It would be hard to pick which one is the bigger D-bag, in my opinion.

Actually looking at a gig in St. Louis now - I'd certainly get to see some weather if I moved to the midwest!
 
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