A Path Is Sought (Bankruptcy) for States to Escape Their Debt Burdens

  • metta

    Posts: 38656

    Jan 27, 2011 8:26 AM GMT
    A Path Is Sought for States to Escape Their Debt Burdens


    And Now, Here's The First 11 State Pension Funds That Will Run Out Of Money
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    Jan 27, 2011 11:14 AM GMT
    Response from House Majority Leader Eric Cantor:
    “I don’t think that that is necessary, because state governments have at their disposal the requisite tools to address their fiscal ills,” the majority leader said, before going a step further.

    “I think some ... have mentioned this Chapter 9 equivalent for states is somehow going to stave off some kind of federal bailout — we don’t need that to stave off a federal bailout. There will be no bailout of the states,” Cantor said. “States can deal with this and have the ability to do so on their own.”

    A legalistic look at the possible feature and its utility:
    A central feature of these promises in many states and municipalities is the capture of both sides of the bargaining table by public employee unions. It is a classic process described by public choice theory, through which the campaign contributions of a highly motivated subset of voters capture the political offices that negotiate economic terms with that same set of voters-as-employees. I have sometimes wondered whether a legal theory — far fetched in court, of course, but not so very far from the situation in economic terms — of fraudulent conveyance could be raised against these kinds of negotiations, as a basis for being overturned in bankruptcy.

    But of course Skeel’s basic point is that you don’t need recourse to a legal rationale like this if you have an explicit bankruptcy-for-states regime. Conceptually, though not as a doctrinal legal matter, I think that capture of both sides of the bargaining table is pretty well described as conceptually fraudulent conveyance. Skeel, to be clear, is not making anything like this argument and as a bona fide bankruptcy expert might easily say it is not even plausible as pure concept.
  • GQjock

    Posts: 11648

    Jan 27, 2011 12:32 PM GMT
    Alabama Town Defaults on Pensions, Files for Bankruptcy Protection
    The dubious honor of being the first city in the nation to completely default on pension obligations goes to Prichard, Alabama.

    Alabama Town’s Failed Pension Is a Warning
    Published: Thursday, 23 Dec 2010 | 4:39 AM ET
    ........ Far worse was the retired fire marshal who died in June. Like many of the others, he was too young to collect Social Security. “When they found him, he had no electricity and no running water in his house

    Oh the guy listed above? .... they found him dead in his unheated house