I love the smell of arrogant, liberal, tax and spend, Democrat, union loving, Keynesian douchebags when their city’s finances blow up in their faces. It seems Obama’s pal Rahm Emanuel has put another nail in the coffin of Chicago. The only thing going up faster than the body count in Chicago is the interest rate on its now junk bond debt. Chicago is now the Greece of the United States.
I can’t think of a better place to house the Obama library than a bankrupt city, run by corrupt politicians, and more dangerous on a Saturday night than Yemen. The death spiral of our urban ghetto shitholes run by liberal Democrats continues unabated. These corrupt politicians and their union acolytes are running out of other people’s money. The producers have left the building. All that is left are parasites and cockroaches.
By Darrell Preston
Chicago may have to pay banks as much as $2.2 billion after Moody’s Investors Service dropped its credit rating to junk, deepening the fiscal crisis in the third-largest U.S. city.The company’s decision Tuesday to cut Chicago’s $8.1 billion of general obligations two ranks to Ba1, one step below investment grade, allows banks to demand that the city repay debt early and exposes it to fees to end swaps contracts, Moody’s said in a statement. JPMorgan Chase & Co., Barclays Plc and Wells Fargo & Co. are among the city’s bankers.The downgrade adds to the financial pressure on Chicago, which was already the lowest-rated of any big U.S. city except Detroit. It follows an Illinois Supreme Court ruling last week that safeguards retirement benefits, casting doubt on Chicago’s ability to curb its $20 billion pension-fund shortfall.
“It certainly becomes a wakeup call for action for the political leaders, and also other parties, to come to the table and find a solution,” said Dan Heckman, senior fixed-income strategist at U.S. Bank Wealth Management, which oversees about $128 billion in Kansas City, Missouri.
Chicago’s cash-strapped retirement funds are exerting a growing strain on the city after it failed for years to set aside enough money to cover the benefits it promised. The annual payment into workers’ pensions is set to rise by $600 million next year.
Beyond RealityMayor Rahm Emanuel, a second-term Democrat, criticized Moody’s decision.
“While Chicago’s financial crisis is very real and at our doorsteps, today’s irresponsible decision by Moody’s to downgrade the city’s credit by two steps goes far beyond that reality,” Emanuel said in a statement Tuesday.
Chicago was already rushing to refinance $900 million of floating-rate debt to reduce the penalties it now faces because of the Moody’s downgrade. It’s planning to go ahead with sales set for next week, according to city officials who weren’t authorized to discuss the deal publicly. Some $383 million of bonds are scheduled to be sold, according to data compiled by Bloomberg.
The city still has investment-grade ratings from Standard & Poor’s, Kroll Bond Rating Agency and Fitch Ratings.
Higher YieldsStill, Chicago will confront higher borrowing costs if it proceeds with next week’s sale, said Michael Johnson, managing partner at Gurtin Fixed Income Management, which oversees $9 billion of munis in Solana Beach, California.
“I don’t necessarily think it would totally lock them out of the market, but I’m not sure they’re prepared to pay the interest rate they may have to pay to actually sell the bonds,” said Johnson, whose firm sold its Chicago holdings years ago.
The yield on taxable city bonds maturing in January 2035 rose Wednesday to 7.55 percent, the highest since March 2011. The price has fallen 16 percent since mid-February to $1.02 on the dollar.
The rating cut triggers provisions in variable-rate bond and swap contracts that allow banks to “immediately demand” termination fees and accelerated payments of interest and principal, Moody’s said. That’s similar to requiring a homeowner to repay a 30-year mortgage in a matter of years. Such provisions helped push Jefferson County, Alabama, into bankruptcy after the 2008 credit crisis.
Persuading BanksJPMorgan, Barclays and Wells Fargo are among those that have agreed to act as buyers of last resort for Chicago’s variable-rate debt or sold it swap contracts, according to city documents.
Jessica Francisco, a spokeswoman for JPMorgan in New York, declined to comment. Elise Wilkinson, a spokeswoman for Wells Fargo in Charlotte, North Carolina, had no immediate comment. Mark Lane, a spokesman with Barclays in New York, didn’t respond to a request for comment.
City officials may be able to persuade its banks not to demand the penalties as long as Chicago can move ahead with its refinancing plan, said Johnson, the partner at Gurtin Fixed Income.
“I would guess that most of their counterparties would be fine letting them go,” he said. “If they end up not selling it, then that creates significantly more risk.”
The obstacles raised by Chicago’s underfunded retirement system increased after the May 8 Illinois Supreme Court decision, which held that the state couldn’t cut retiree benefits.
Court ChallengeThat ruling may bear on legal challenges to Chicago pension overhauls that affect about 60,000 employees.
The suits were put on hold pending the outcome of the Illinois lawsuit. With the ruling in hand, lawyers for the city, the state, the workers and their pension fund appeared before a Chicago judge Wednesday to map out a plan to resolve their cases. At the hearing, Cook County Circuit Judge Rita Novak said the state’s high court will have the last word on the case.
Moody’s said in a statement that the city’s options have “narrowed considerably” because of the ruling.
“The Supreme Court ruling in our view raises the risk that Chicago’s pension reform won’t work,” said Matthew Butler, an analyst with Moody’s.
Chicago downrated to B_Double-Rahm2, to the surprise of absolutely no one.
In the past, there were people that would salvage stuff from ship wrecks. They were, rather creatively, called Wreckers. Sometimes they might have placed false lights to improve the odds of a wreck happening. Now, I wonder if they ever paid the ship’s captain to intentionally wreck a ship, and if the descendants of the wreckers now work in finance.
My mother in law was complaining the other day about democrats and their wish to “give” illegals SS even though they never worked for it.
After listening to her rant for 20 min I reminded my 77 year old mom in law that she collects her dead second husbands Chicago pension that she never worked for either, in fact she never lived in or paid Illinois taxes. Asked her what the difference was.
That question didn’t go over very well, not well at all…..
Something has to break, the trip to and after the break is not going to be pretty.
Its not a LIBRARY its a LIEBURY.
Card ,you Mongolia rat .How dare you treat your mother like that. For God’s sake man!!
“(Moody’s) decision Tuesday to cut Chicago’s $8.1 billion of general obligations two ranks to Ba1, one step below investment grade, allows banks to demand that the city repay debt early and exposes it to fees to end swaps contracts. JPMorgan Chase & Co., Barclays Plc and Wells Fargo & Co. are among the city’s bankers.”
—-from the article
Well, there you go, Admin. One sentence explains what COULD HAPPEN to Chicago, and the next sentence explains why it won’t. Do you think the politically-connected TBTF banks would ever take advantage of Chicago with Obama in office?
Sheesh, read for comprehension
Someone will get a HAIRCUT and it won’t be pretty. The Godfather will have to sneak out of town after he gives them “a offer they can’t refuse”.
Alpo and crackers for all the pensioners!!!!
since there’s soon be an overabundance of poor people in Chi-town ,I think the subject of what po’ slobs should be allowed to eat is in dire need of being broached.
Pensions were promised based on 7-8% annual returns in perpetuity, a mathematically impossible feat (yet one still taken as Gospel in every financial planner’s manual.)
It is phenomenally instructive to put my wife’s Teacher Retirement System pension projections into Excel to determine the Present Value of the pension itself.
To say it’s eye-popping is an understatement.
If she were to retire with something like 15 years of service, and have paid in a healthy chunk of change along the way, if you input a more reasonable 2% annual rise in underlying asset value, her PV of the pension is probably worth 8 times what she paid in.
That’s why these defined benefit plans are doomed. 7% assumptions were fairy tales.
Of course, look for the pension of people working close to the mayor of Chicago and everyone in the State of Illinois Building to be Very Very Whole. Those clowns will get $100,000-plus per year for the rest of their lives, even if they have to burn down every taxpayer’s house in Illinois to make it happen.
What’s up with poor people?They just need to get a jon…..damn national pain the corporate back pocket.
Tiny bench a big problem for Asheville’s homeless
http://www.usatoday.com/story/news/2013/06/17/homeless-tiny-bench/2432821/
They say the bench was downsized to push them out; parks officials say the stubby perch will help protect artwork.
In the end, the attempt to make “good” on IL’s budget woes will render all private property in the state almost valueless.
Either living conditions will crater, taxes will drive everyone to sell out and run, or a nifty combo of both. In any event, IL will be Detroit….only at the state level.
What I love is Ramyouwell’s plea:
“Hell, just because we are totally broke is, like, you know, no reason to downgrade our rating. How the hell are we supposed to be able to borrow more money we cannot pay back if you downgrade our rating?”
Un-fucking-believable.
from the keepin ‘ em’ fat ,stupid and sick file…..good on your KFC…
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Help KFC Fight Diabetes by Purchasing Their Half-Gallon Mega Jug of Soda, Possibly Getting Diabetes!
Don’t tell your heart doctor about this one.
KFC, purveyor of perhaps the world’s worst chicken for human consumption and the most gluttonous sandwich ever imagined, has quietly gained a new distinction this past year as it slowly rolls out the biggest fountain drink any fast-food outlet has dared to offer.
The KFC Mega Jug, at 64 ounces (2 liters, or half a gallon), matches the size of 7-11’s largest soda vessel, the Double Big Gulp. As this blogger points out, that’s about twice the liquid an adult human stomach can hold, and for a healthy, normal-sized person should take 4 or 5 hours to consume. The Mega Jug hefts so much liquid weight that it needs a paint-can-style handle for carrying.
Read more: http://www.minyanville.com/mvpremium/2011/06/14/kfc-introduces-worlds-biggest-fast/#ixzz3a4TE6mGY
Read more: http://www.minyanville.com/mvpremium/2011/06/14/kfc-introduces-worlds-biggest-fast/#ixzz3a4T6lBum
Every 117 years a city should celebrate by hosting a World’s Fair. Shedd aquarium and Field Museum need a facelift that only another Columbian Exposition can provide. Still have a 50 cent piece from my Grandmother when she last visited.
Another thought, privatize Lake Michigan and let California buy it .Worked well with the parking meters.
With such great ideas why did I flee from there 25 years ago?
Mind you, Rahm has done his share of damage in his short tenure as mayor, given that this situation had set up by the time he first took office, yet he steadfastly refused to change the city’s course and instead resorted to various financial swindles to kick the can a little further.
The real damage was done during the tenure of his predecessor, Richard Daley the Younger, and most of all, Alderman Ed Burke, the supremely arrogant, overbearing head of the Finance Committee. During the time these two presided over the city, we went from being absolutely solvent, and one of the best-managed cities in the country in 1987, to our present condition. Richie Daley was the kind of guy who spends $10,000 on a shower curtain while the furnace boiler is on the blink and the roof is leaking. He built trophy parks and put flower planters on the medians while the city’s core infrastructure continued to deteriorate, and drove the formation of over 150 TIF districts that have conveyed our property taxes to connected corporate cronies.
Yet I would not assign the ultimate responsibility even to these two. I would assign that to the citizenry that applauded all this, and these citizens are not the poor blacks, either, though that particular population sure as hell has not been helpful.
Yet the citizens most responsible are the rich denizens of neighborhoods like Streeterville, the Near North Side, Lincoln Park, and Lakeview, who applauded every expenditure on trophy parks, sports venues, and unnecessary TIF development because all this dresses up their expensive neighborhoods and “brings money”. They never ask to whom it “brings money” but it sure as hell isn’t the city’s coffers, for a fact. Our well-off “yuppie” population continues to bid up overpriced properties in the green zone neighborhoods into the stratosphere, seemingly oblivious to the axe hanging over all our heads. It is no coincidence, at least in my mind, that Daley and Burke saw their greatest support among the rich denizens of the 42nd, 43rd, and 44th wards, as well as in Burke’s Beverly neighborhood.
And Daley consistently had high approval ratings among suburban Republicans, something he was very proud of, possibly because these people made a lot of money off the city as connected cronies.
What is happening in Chicago is the end run of crony capitalism AND the welfare statism of the Democrats and Republicans alike.
Don’t worry Chicago taxpayers, the upcoming bankruptcy won’t help you at all.
Here is what I’ve learned from Detoilet’s bankruptcy.
1. The only private people that actually paid were small and mid-sized vendors, they ate 100% of their unpaid invoices.
2. The connected vendors were guaranteed increased rates on new contracts in exchange for eating old billing. The not connected were mostly driven into, or near, bankruptcy.
3. The reason for the bankruptcy – pensions, healthcare and union work rules – came out nearly unscathed. Retirees were forced to give up 4%. FOUR freaking percent. Yep, that’ll fix it. And they are suing to get it back.
4. Everybody is now scrambling to get pay raises and further benefit increases before the next time things go south, and oh boy, they will.
5. The state and federal taxpayers, suburban water department users, and others are being made to pay most of the new taxes to generate income pretending to be enough.
6. Services are still be cut, poorly performed and ignored.
7. The real winners, wait for it, were the banksters that enabled the unsustainable debt and the lawyers. Billions for those two groups
As long as the bankruptcy can be filed, or avoided, while the stock market and reality remain at insanity levels, nothing is going to change.
The real fun won’t start until those two assets revert to the mean.
Then *boom* nothing will be fixed and without confiscating everything within the borders nothing could be fixed anyway. The promises and contracts and unicorns run too deep. Way too deep.
In other words, that which can’t be sustained, won’t be.
And what interesting times are headed this way.
Your thinking is so similar to mine it’s scary.
When they can’t sell bonds no matter what the interest rate??????