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Detroit Files for Largest Municipal Bankruptcy in US History

So in your value system breaking your contractual promises is simply something done because your extremist beliefs let you do it.
Welcome to reality. The saddest part is that any contract made by government has the taxpayer, indefinitely, on the hook for it. In stark contrast to the rest of us schlubs in the private market who have no taxpayers and state entity on the hook, we have to make smart decisions in the wild west of private industry...that place that funds the existence of the public space in the first place. Private industry goes down, they are **** out of luck. Being on the hook for union/public pensions, while our own are subject to market forces without such security, that's entirely unfair to the taxpayers who were not in control of the negotiation in the first place. It's also unfair because the taxpayers are subsidizing what the public workers benefit form in terms of better pension return points (at least 1-2% better than similar private), the less likelihood of bankruptcy (oops!). Unions, but especially public unions, are a blight for that and many other obvious reasons. And I can assure you, I have never promised to fund Detroit's public pensions.
 
No, I mean it looks like the area was bombed or something, not just random thugs shooting at each other.




Part of that is from the 1967 riots and part is from freeway construction/urban-renewal.

I was born in Detroit 70 years ago and I know that it is a vastly different place today from what it was then or even 50 years ago.
 
I heard this on the radio today: "If Obama had a city, it would look like Detroit" LOL
 
Well a judge just ruled that the filing was unconstitutional and violates the rights of pensioners.

WXYZ) - A circuit court judge in Ingham County ruled that the City of Detroit’s Chapter 9 bankruptcy filed on Thursday violates the Michigan constitution, according to court orders she issued in three separate cases involving city pensioners.

Ingham County Circuit Court Judge Rosemarie E. Aquilina issued the orders Thursday and Friday, including a temporary restraining order, in an attempt to halt the Chapter 9 filing by Emergency Manager Kevyn Orr. The judge says the bankruptcy filing “…will cause irreparable injury” to the pensioners.

“In order to rectify his unauthorized and unconstitutional actions described above,” wrote Judge Aquilina, the Governor must (1) direct the Emergency Manager to immediately withdraw the Chapter 9 petition filed on July 18, and (2) not authorize any further Chapter 9 filing which threatens to diminish or impair accrued pension benefits.”

The order also includes many hand-written notes through them, including a final note on one order from the judge, which states that the order will “…be transmitted to President Obama.”

The judge will hold a hearing on Monday, at 9 a.m. on the restraining order, which she also writes is in effect until August 22.

Read more: Judge rules Detroit Chapter 9 bankruptcy filing unconstitutional

So this is far from an open and shut case. The question as to pensions is a very very significant question in this case as this ruling shows.
 
Welcome to reality. The saddest part is that any contract made by government has the taxpayer, indefinitely, on the hook for it. In stark contrast to the rest of us schlubs in the private market who have no taxpayers and state entity on the hook, we have to make smart decisions in the wild west of private industry...that place that funds the existence of the public space in the first place. Private industry goes down, they are **** out of luck. Being on the hook for union/public pensions, while our own are subject to market forces without such security, that's entirely unfair to the taxpayers who were not in control of the negotiation in the first place. It's also unfair because the taxpayers are subsidizing what the public workers benefit form in terms of better pension return points (at least 1-2% better than similar private), the less likelihood of bankruptcy (oops!). Unions, but especially public unions, are a blight for that and many other obvious reasons. And I can assure you, I have never promised to fund Detroit's public pensions.

Oh, please. Did we not bail out banks? The same people who are helping to write laws for themselves? Tax payers pay toward public resources because they are necessary for their city/town to function. Of course they could turn it over into private hands which is exactly what they are looking to do but it won't save money. Just look at the private prison industry.
 
Towers Watson, the global human resources consultant, found that pension-style plans beat 401(k)-style offerings by nearly 3 percentage points in 2011, the latest study year. Pensions made investment returns of 2.74% while defined contribution plans lost money, banking -0.22%.

It’s no fluke. Pension plans often beat 401(k) plans. Since 1995, Towers Watson found, defined benefit plans outperformed by 76 basis points annually (0.76%). The did so in nearly all of those years except years in which stocks boomed, such as 2009.

Part of the reason is mutual fund fees. Mutual funds in the plans studied had weighted average expenses of 65 basis points in 2011, a drag which reduced overall returns by 31 basis points. Nearly half of the 401(k)-type plans were composed of mutual funds, compared to just 14% in the pension-style plans.

“The spread between the two has been narrowing, and with many sponsors adjusting the asset allocation strategy of their DB plans to better match assets to liabilities, the disparity may diminish further in the future,” said Chris DeMeo, head of Investment, Americas, at Towers Watson.

Translation: Pension plans do a better job with less risk. Pension Plans Beat 401(k) Savers Silly -- Here's Why - Forbes

This is so distorted its like Apples to Cinder Blocks- not even close of a comparison.

Pension funds are managed by a consortium of instructional portfolio managers- 401k assets are not! Instead participants are given a menu like assortment of mutual funds to chose from. The performance of a plan is directly related to how it's non-sophisticated participants allocate their money so it's no surprise the Pros beat Mr. Joe Schmo. Furthermore, pensions can invest in alternative strategies like PE that a 401k can't.

Furthermore, the only way to measure outperformance is on a risk-adjusted manner.
 
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Re: Detroit emergency manager files bankruptcy

....Which? ;) I'd love to know. These ones?

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The reality is a simple one. If a state is getting bailed out, the money will come from rich blue states.
Put that in context.

Red states are cheaper to live. Lower costs of living mean lower wages than average as well. When you use one-size-fits-all government policies, more people will qualify for these government subsidies.

Blue states, higher wages, more tax revenue.

Red states, lower wages, lower tax revenues... progressively...
 
This is so distorted its like Apples to Cinder Blocks- not even close of a comparison.

Pension funds are managed by a consortium of instructional portfolio managers- 401k assets are not! Instead participants are given a menu like assortment of mutual funds to chose from. The performance of a plan is directly related to how it's non-sophisticated participants allocate their money so it's no surprise the Pros beat Mr. Joe Schmo. Furthermore, pensions can invest in alternative strategies like PE that a 401k can't.

Furthermore, the only way to measure outperformance is on a risk-adjusted manner.

Yes, a benefit of pensions is they are handled by professionals rather than employees which makes it less subject to kinds of mistakes inexperienced employees may make.
But, the biggest advantage for both employers and employees is that the administrative expenses as a percentage of assets are much
lower for defined benefit plans: 0.3 percent compared to 0.9 percent for defined contribution plans.
 
Ah yes - serve the needs of the rich corporations over the needs of the common people. Got it. :doh:roll:

follow the law rather than whining about capitalism. One of the incentives of a bondholder is certain guarantees. What part of contract do you not agree with?
 
Re: Detroit emergency manager files bankruptcy

Put that in context.

Red states are cheaper to live. Lower costs of living mean lower wages than average as well. When you use one-size-fits-all government policies, more people will qualify for these government subsidies.

Blue states, higher wages, more tax revenue.

Red states, lower wages, lower tax revenues... progressively...

Yeah. I've seen that measure before. It's also counting military bases and all the income that go to servicemembers as a form of aid. :roll:
 
Just responding to your "we should screw over private sector retirees in order to better benefit public sector retirees."

It was haymarket that argued that this was a conflict of interest group v interest group, rather than a matter of applying the law. I was pointing out that he was inaccurately describing the interest groups when he called for prioritizing one over the other - that "screw over private sector retirees in order to better benefit public sector retirees" was his argument, not mine. Mine was and remains that we should apply the law.
 
Re: Detroit emergency manager files bankruptcy

Detroit emergency manager files bankruptcy - Chicago Sun-Times

Amazing how successful the liberal economic policies are for major cities in this country. This is the largest city in the nation to file for bankruptcy with more to come. Liberals better wake up
This is what happens when you elect community organizers into office. It's utterly fantastic for the organizers, but total hell for the organized.
 
Yes, a benefit of pensions is they are handled by professionals rather than employees which makes it less subject to kinds of mistakes inexperienced employees may make.
But, the biggest advantage for both employers and employees is that the administrative expenses as a percentage of assets are much
lower for defined benefit plans: 0.3 percent compared to 0.9 percent for defined contribution plans.

Pensions are based on future guarantees- that's the whole reason they've gone away- they're expensive even if your Pros can manage the assets well, there is still a much higher cost of funding.

A good approach would be to allow 401k plan participants to hire pros to help them; however ERISA rules make this a very tricky process.
 
Pensions are based on future guarantees- that's the whole reason they've gone away- they're expensive even if your Pros can manage the assets well, there is still a much higher cost of funding.

A good approach would be to allow 401k plan participants to hire pros to help them; however ERISA rules make this a very tricky process.

What's also happened with these pension plans is that the projected returns remain as they've been for years; and actual returns? Well, they're in the toilet . . . so municipalities are forced to make up the difference. It's a whore's nightmare.
 
Mine was and remains that we should apply the law.

Fair enough. I'm just not convinced that any real kind of law can apply to corruption. The mere fact that Wall Street did to Detroit what it did to homeowners makes my blood boil. They conned the city (and many others in the US) into borrowing money using complex loans that their own finance people didn't understand while they manipulated the market. Now everyone loses in this mess except Wall Street bankers. A must read, "Only Wall Street wins in Detroit Crisis" -Bloomberg
 
What's also happened with these pension plans is that the projected returns remain as they've been for years; and actual returns? Well, they're in the toilet . . . so municipalities are forced to make up the difference. It's a whore's nightmare.

Not only did Detroit borrow from its own pension funds to pay expenitures they also underfunded them by 100 million and then they entered into swap agreements to make up for its shortfall. What happened was pure corruption and to say that all public pensions are bad and use a corrupted situation as an example is frankly disingenuous.
 
Not only did Detroit borrow from its own pension funds to pay expenitures they also underfunded them by 100 million and then they entered into swap agreements to make up for its shortfall. What happened was pure corruption and to say that all public pensions are bad and use a corrupted situation as an example is frankly disingenuous.

And to believe you without a link would be, ummmmm, foolish.

Please be so kind as to refute my statement in the meantime, yes? What is the projected rate of return built into the pension plans? That's a huge problem today.

You can't blame people if they don't know the truth -- and you don't present it. Can you.
 
And to believe you without a link would be, ummmmm, foolish.

Please be so kind as to refute my statement in the meantime, yes? What is the projected rate of return built into the pension plans? That's a huge problem today.

You can't blame people if they don't know the truth -- and you don't present it. Can you.

Sure, I can give you a link-

"From 1995 through 2011, the median annual rate of return for defined benefit plans was 8% compared with about 7.3% for defined contribution plans, according to the Towers Watson & Co. analysis.

“DB plans have some inherent advantages that have helped them historically outperform their 401(k) counterparts, such as lower investment fees, longer investment time horizons and management by investment experts,” Dave Suchsland, a senior retirement consultant in Towers Watson's Philadelphia office, said in a statement.
http://www.businessinsurance.com/article/20130522/NEWS03/130529945#
 
Sure, I can give you a link-

"From 1995 through 2011, the median annual rate of return for defined benefit plans was 8% compared with about 7.3% for defined contribution plans, according to the Towers Watson & Co. analysis.

“DB plans have some inherent advantages that have helped them historically outperform their 401(k) counterparts, such as lower investment fees, longer investment time horizons and management by investment experts,” Dave Suchsland, a senior retirement consultant in Towers Watson's Philadelphia office, said in a statement.
http://www.businessinsurance.com/article/20130522/NEWS03/130529945#

I really don't mean to be difficult, but this is a subject I have keen interest in. While your source says what IT says, this source says otherwise:

At least three of the nation's largest U.S. public pension funds have already announced returns of between 1 percent and 1.8 percent, far below the 8 percent that large funds have typically targeted.

The fund's targets have been "unrealistic," said Michael Lewitt, a portfolio manager at Cumberland Advisors in Sarasota, Florida. "They've been fooling themselves because there is no realistic case they can make that."

Public pension funds to face calls to set realistic targets | Reuters

You can obviously see what happens when the projected return is too high . . . it initially looks like pension funding will be $1 million ("Hey, we can afford that!") when in reality, because rosy projections are used, the actual funding ends up at $2 million. (Or whatever...poor example, but I think you get it.)
 
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