Coming Soon to a State Near You

Thursday, May 4, AD 2017


Puerto Rico has filed bankruptcy:

As per our report last night that following the expiration of the litigation freeze, Puerto Rico’s creditors had filed a barrage of lawsuits against the insolvent Commonwealth a bankruptcy was imminent, moments ago Puerto Rico’s governor announced the commonwealth will request bankruptcy protection of a portion of the island’s $70 billion in debt, setting up a showdown with Wall Street firms owed billions of dollars, in what will be the largest-ever U.S. municipal debt restructuring and further complicating the U.S. territory’s efforts to pull itself out of a financial crisis.

The Puerto Rico restructuring would be far larger than Detroit’s record-setting bankruptcy, with little to no details how long a court proceeding would last or what cuts would are imposed on bondholders. The island’s financial recovery plan covers less than a quarter of the debt payments due over the next decade.

Cited by AP, Gov. Ricardo Rossello said Wednesday that a federal control board overseeing the island’s finances has agreed with his request to put the debts before a court. He told reporters that he has requested that the U.S. territory’s federal financial oversight board commence a Title III proceeding under last year’s Puerto Rico rescue law known as PROMESA. Title III is an in-court debt restructuring process similar to U.S. Bankruptcy.

Continue reading...

19 Responses to Coming Soon to a State Near You

  • My understanding is that PR does not have access to US bankruptcy laws.

    In any case, Puerto Rico cannot pay according to the terms. Ergo, investors will calculate the recoverable amounts using reasonable estimates of the amounts believed to be recoverable over a reasonably estimated time frame, and discounting those cash flows at the stated rate of the bond indentures. The calculated/estimated deficiency would be charged as a loss.

    Similar fiscal catastrophes are brewing in most so-called blue states. Also, many pensioners will face tragic reductions.

    This is what happens when the SJW’s run out of other people’s money. They can’t repay them.

    It will be interesting to see if Uncle Sam bails out pension fund and Wall Street investors in Puerto Rico defaulted paper.

    Isn’t that why they pay people like Hillary $250,000 and Obama $400,000 for 20-minute schmoozes?

  • “My understanding is that PR does not have access to US bankruptcy laws.”

    Incorrect. Congress changed the law last year to allow Puerto Rico to file bankruptcy.

  • You know this is coming to “your” blue state imminently.

    Here in the mentally-ill state of California, the actual market basis allocated debt per household for the state’s ballooning pension debt is about $75,000 each: $1 trillion total. and the state actually pretends to run a surplus but is not.
    Even that hardly right-wing org, Stanford Institute of Public Policy issued a warning in December (2016) of the unsustainability of just the pension debt load on the state’s budget.

    But nobody pays attention.

  • Thanks, Donald, I retired from this pomp and circumstances end of May 2015. My accounting answer wasn’t 100%, either. The discount rate would be the effective rate (related to the purchase price) at which the debt security was acquired.

    The pension funds’ yield estimates often are too high (high risk, high yield). It’s one way they can estimate they are “solvent.” Estimation approaches have been made to be complicated which allow the numbers to be manipulated.

    Anyhow, government without justice is mass brigandage – St. Augustine. Government is the middle man in the robbing of Peter to pay Paul. It’s a code word for the crimes we agree to commit in unity.

  • Interesting that the State of Californication is cited in the comments above. Apparently they have been as foolhardy with their finances as they have with their power generation. Rancho Seco was shutdown in the 90s. San Onofre is now gone. And Diablo Canyon is next. No nukes Californicators! And they want useless worthless green energy wind mills that don’t turn when you need them to and solar cells that don’t produce on cloudy days or at night time. and they won’t allow any coal or gas or oil generation – dreaded carbon emissions! I say let the Californicators suffer and wallow in the mess and filth that they have created. Sanctuary cities, open sodomy, rampant baby murdering. Let them reap the punishment they have brought on their own heads. For the righteous in Californication, I have one phrase – MOVE OUT! FLEE! Do as Lot did regarding Sodom and Gomorrah! For the rest I have nothing but disgust.

  • Agree, Lucius Magnificus, regarding exit-strategy from Californicate-ya and the SF Baytheist Area.

    Our planning strategy is in place in 3 years 4 mos for NE Utah, and the clear free air and where open-carry prevails and a men’s restroom means men only.

    But a small perverse fascination I will have to forego is to watch the daily CA madness and the certain coming train wreck.

  • What about those of us at that awkward age (50 something) where you’re probably too old for a new employer to hire but still at least 10-15 years away from retirement? Is there any good exit strategy for us?

  • I would recommend for such a person Elaine seeking employment in small town businesses. Often times they have difficulty getting young employees and they often have more appreciation for an experienced worker than urban employers. This applies both to the private and public sectors in rural areas, at least in Central Illinois in my experience. In my county experienced secretaries, especially those with computer skills, often are in high demand.

  • How ’bout we agree to a federal bailout of bankrupt states IF those states agree to revert to territorial status?

    A lot of liberal Congress Critters would suddenly find themselves neutered.

  • What about those of us at that awkward age (50 something) where you’re probably too old for a new employer to hire but still at least 10-15 years away from retirement? Is there any good exit strategy for us?

    The state college in Springfield, or one of the other state campuses. They generally have TIAA-CREF, which is distinct from state and local pension systems. With your background, you might be a good fit for the communications office.

  • Art, by “exit strategy” I meant getting out of IL altogether so getting a job at a state university isn’t going to help. All IL state universities are on the State Universities Retirement System (SURS) which is part of the same astronomical pension liability as the State Employees Retirement System (SERS) and the Teachers Retirement System (TRS).

  • I’m quite surprised TIAA-CREF is not covering your state schools. You could apply to a private institution. St. Louis University and Washington University in St. Louis come to mind. If you’re inclined toward small cities, there’s a clutch of them in Indiana and Iowa and Wisconsin. Your mobility is going to depend on your husband’s occupation. While we’re at it, Wisconsin’s state pensions are fully funded.

  • “My understanding is that PR does not have access to US bankruptcy laws.”
    –T. Shaw

    Incorrect. Congress changed the law last year to allow Puerto Rico to file bankruptcy.
    Donald R. McClarey

    That Congress finally acted in this matter is fortunate for Puerto Rico’s creditors, else they would not have access to US bankruptcy laws but only to whatever the Commonwealth of Puerto Rico imposed on them.

  • Don’t get too smug thinking about California’s state debt and unfunded pension liabilities, Lucias, Elaine, et. al.. Your own state’s may be worse. Illinois, for example. Or not much better. Utah, for example, has about half of what California has. Yet half of unmanageable is still unmanageable.

  • Illinois will eventually be the first state to go into bankruptcy.

  • I don’t think that is correct. The US Constitution runs in Puerto Rico so they simply could not declare debts null and void, and the Commonwealth could always be sued in Federal Court.

  • Yet half of unmanageable is still unmanageable.

    No, state debts are manageable. Even during the Depression, only 3 states were in default. What’s of concern is unfunded liabilities. Some states have actuarially sound retirement systems, some do not.

  • Puerto Rico has some long-standing problems in its social and political economy, as well as more recent economic woes (a decade-long recession, for starters). It’s not terribly representative.

  • In 2015, Wall St Journal did a good analysis of the states with worst unfunded pension liabilities: At that time, those red states like S Dakota (#1 most well funded) , Nebraska (#12 most well funded) and others, like Utah (#14) etc did pretty well:

    It is a nice graphic and snapshot of the future Puerto Rico’s among us. CA at that time was #21, but Stanford Institute for Public Policy now puts them near the bottom (report Dec 2016), with the $1 Trillion unfunded dollars I mentioned above.
    And who was dead last? Illinois, #50. Land of Barry O.

    However, you all may be familiar in June of 2016, George Mason U. ranked all the states again in terms of total debt—accumulated debt as well as annual IOU’s and other notes payable.

    Again, nice and neat, but Illinois actually has other blue-blue-state company: Connecticut, New Jersey, and Massachusetts. You can click on each of the 50 states (or 57 if you are Barry from Down Low Chi-town) and get the real numbers.

    Yes, Utah looks pretty good compared with Californicatia.

Detroit: Canary in the Mine for Blue States

Friday, July 19, AD 2013




Detroit has been de facto bankrupt for a very long time and yesterday it became de jure bankrupt with a Chapter 9 bankruptcy for the former Motor City.  Hard to believe that during World War II Detroit was the heart of the American industrial machine that produced more military equipment than the rest of the world combined.  How did the city that helped this nation win a world war end up looking like one of the bombed out cities of Europe circa 1945?  There are many culprits involved but W.R. Mead at his blog Via Meadia knows who the chief villians are:

Detroit has been spending on average $100 million more than it has taken in for each of the past five years. The city’s $11 billion in unsecured debt includes $6 billion in health and other retirement benefits and $3 billion in retiree pensions for its 20,000 city pensioners, who are slated to receive less than 10 percent of what they were promised. Between 2007 and 2011, an astounding 36 percent of residents lived below the poverty line. Last year, the FBI cited Detroit as having the highest violent crime rate for any major American city. In the first 12 years of the new century, Detroit lost more than 26 percent of its population.

And now Detroit’s desperate request for a bailout has been turned down by the Obama White House.

Progressive politicians, wonks, and activists can only blame big corporations and other liberal bogeymen for so long. The truth is that corrupt machine politics in a one-party system devoted to the blue social model wrecked an entire city and thousands of lives beyond repair. The sooner blues come to terms with this reality, the greater chance other cities will have of avoiding Detroit’s fate.

Continue reading...

12 Responses to Detroit: Canary in the Mine for Blue States

  • How stupid an investor do you have to be to hold Detroit bonds, ie to be a Detroit creditor? Don’t they deserve pennies on the dollar?

  • Obama in 2012 said, “We refuse to let Detroit go bankrupt . . . (under his breath)until after the Election.”

    This is just one of the 50 or so disasters needing to be ignored causing the Zimmerman verdict to get 24/7 propaganda air-time.

  • As I’ve long noted, Detroit exists so that Cleveland has some place to feel superior to.

  • Detroit’s population loss was second only to New Orleans, but N.O. has nature to blame. The blame for Detroit’s woes can be laid squarely on the shoulders of its residents for voting for the same people, the same policies and the same party for half a century, which is how long it’s been since it’s had a Republican mayor (Chicago, for its part, hasn’t had one since Herbert Hoover was president. Can it be far behind?)

  • “Can it (Chicago) be far behind?”

    Not so fast. Yes, Chicago does have some of the same problems in the form of pension liabilities, crime rates, population loss from the city (not nearly as drastic as in Detroit, but still significant), persistent cronyism and corruption, etc. However it has one significant asset that Detroit did not have: a more diverse economy not dependent upon one industry. A downturn or collapse in, say, the farm commodity market would not devastate the entire economy of Chicago the way that the collapse of the American auto industry destroyed Detroit. That said, there are certainly danger signs that bear watching, keeping in mind that if Chicago ever does go de facto bankrupt the entire State of Illinois would be dragged down with it (although a sovereign state cannot declare bankruptcy in the same fashion as a municipality).

  • Just to point out, the ratio of population of Chicago to its suburbs is 0.47. That for Detroit is 0.21. The dimensions of the Detroit municipality hardly transcend (if at all) the dimensions of slums of the Detroit metropolis as a whole. The homicide rate in the Chicago municipality bounces around a set point of 16 per 100,000. That for the Detroit municipality bounces around 40 per 100,000. The public schools in Chicago are appalling, but there are broad swatches of agreeable neighborhoods and many urban assets. Chicago needs a decent and capable human being in the mayor’s chair. Detroit needs a conservator. Two quite different situations. (Both would benefit from the creation of a metropolitan authority and a redistribution of functions between states, encompassing authorities like counties, and municipalities).

  • Dale Price lives in the area. I would be pleased to hear his take on this.

  • As I’ve long noted, Detroit exists so that Cleveland has some place to feel superior to.

    You know, though, Cleveland has was a punchline for Rowan and Martin. Detroit did not really hit the skids until the 1967 riots, although disquieting signs were manifest a decade earlier. By around 1976, the place was considered the country’s A#1 urban disaster.

    I recall that around 1987 Irving Kristol pulled up stakes and moved from New York to Washington. He offered that in 20 years, New York would look like Detroit, and he would prefer to spend his old age in more agreeable surroundings. New York chose the right future, and that you would not have expected.

  • Detroit’s population loss was second only to New Orleans, but N.O. has nature to blame.

    New Orleans has a homicide rate which exceeds Detroit’s by about a third (i.e. about 53 per 100,000). Keep in mind that the New Orleans municipality encompasses more than 40% of the New Orleans metropolis. Jefferson Parish, suburban to New Orleans, has a homicide rate of 10 per 100,000. The Detroit suburbs have a rate of 2.4 per 100,000. Police forces in Louisiana tend to be understaffed, but their judges are quite happy to incarcerate people. Prison admissions per capita are half again the national mean (though mean time served is about average). Louisiana has most years the highest homicide rate in the nation; something is seriously wrong with the culture down there.

  • “Louisiana has most years the highest homicide rate in the nation; something is seriously wrong with the culture down there.”

    Louisiana has the second highest rate of single parent homes (MS has the highest.) In some areas of NO and Baton Rouge the number of single parent homes is in the 80’s. This alone is sufficient cause for a higher crime rate.

    Throw in that the effect of single parenthood on delinquency increases as the number of single parents in the neighborhood increases, then I think we have a lead on a large part of the problem. For example, Baton Rouge has a high murder rate. Almost all of that is black on black crime in, if I recall correctly, three zip codes. These are all areas with 80+ per cent single parent homes.

  • Hmmm.

    I have had a look at the descriptive statistics for Louisiana. You have a background rate and then spikes at particular locales. The locales in question are New Orleans, Baton Rouge, Shreveport and three small towns (Bogalusa is one and the other two I forget). The excess over the background rate is far higher for New Orleans than for Baton Rouge and notably higher for Baton Rouge than for Shreveport and the three towns. (Shreveport has what would be a normal inner city homicide rate most places up north).

    In New York, the background rate is between 1.3 and 2.8 per 100,000 and you see the spikes in dodgy inner city neighborhoods all over the state (worse Upstate than Downstate). That pattern is repeated in Louisiana. It is just that your background rate appears to be about 9 per 100,000. A post-industrial mess like Utica has a homicide rate on a par with what you would expect to see in the generic suburban or countryside locale in Louisiana.

  • To hear my (now 84-year-old) father tell it, when the family lived in NOLA back in the early 60s, there was no 9th Ward to speak of. It was a swamp (like what it’s right next to now) which was drained under LBJ’s Great Society in order to ship in Democrat voters.

    Little wonder the residents have stayed away in droves – the machine used them for a generation-and-a-half but utterly failed them when the tables turned.

It Is An Ill Wind

Saturday, April 14, AD 2012


Hattip to Instapundit.   As faithful readers of this blog know, I am, for my sins no doubt, an attorney.  My bankruptcy practice has grown 20-25% each year of the Obama administration:


Tax refunds being used to pay for bankruptcy filings. “More than 200,000 money-strapped households will use their tax refunds this year to pay for bankruptcy filing and legal fees, says a new study by the National Bureau of Economic Research.”

Continue reading...

6 Responses to It Is An Ill Wind

  • Former FDIC Chairman (was possibly the only competent person in DC since Bush left) has a modest proposal (Swiftian) in the Wa Post.

    She wants to end income inequality and stimulate the economy by providing to the American household the same loans Bernanke, Geithner, and Obama have been giving to Goldman Sachs, AIG, JPMorganChase, et al since late 2008.

    The Fed has been handing Trillons $$$ in basically interest-free loans to banks to spark the recovery.

    Ms. Bair suggests that each American household receive access to the Fed printing press by be granted a $10 million interest free loan.

    This way Main Street gets a piece of the action as well as Wall Street. And, no bureaucrats are involved.

    Makes as much sense as handing interest-free trillions to billionaire banksters.

    Tell me again why you voted for Obama . . .

  • Two of my daughters lost their homes and are now renting. One’s husband’s overtime was cut off. The other daughter’s job was sent to Japan (where their product was inferior because they did not know what they were doing) Now, she is making sandwiches in a Seven Eleven while trying to put her children, my grandchildren, through college. The bank refused to take the key to the house back, leaving her with a mortgage forever. My son and the famly all helped. Her house was sold, but there was only so much we could do. Do not let Obama tell anyone that the stimulus package was anything but to get him reelected. Obama is pretty sure of being reelected, but not with my vote.

  • Obama is pretty sure of being reelected,

    How so?

  • Art Deco: I am doing everything possible to ensure FREEDOM.

  • Middle class manufacturing jobs have been going overseas since the ealry 80’s.
    We started loosing jobs well before Obama came into office. It’s not him nor was it Bush. It’s the rules that allow the highest top 5% to run things the way it benefits them. Corporations have been getting breaks long before Obama and we were not getting those breaks before him either.
    We need strong middle class and a viable third political party.
    We can’t spend $trillions on poorly strategized wars that provide no clear winners and expect the economy to shine. It’s all of us – keep buying your goods from overseas, but keep complaining about the economy…my car was made in Indiana…how bout yours?…what percentage of durable goods in your household were built in America?
    Our policies stink and are counter to growing a strong middle class. Don’t need a president for that.
    We need to generate the political will to make the changes required. The republicans have the house, but what bills have they produce or gotten into law that help the middle class? This shouldn’t be us vs them…it should be how we are going to get together to solve the root causes of the problems you’re all complaining about. Certainly Mitt isn’t the answer…

Hard Times and Bankruptcy

Wednesday, January 6, AD 2010

Hattip to Ed Morrissey at Hot Air.   As regular readers of this blog know, I am, for my sins no doubt, an attorney.  I was examining the year end stats for my practice, and I noticed that the legal fees I derived from my bankruptcy representation of creditors and debtors almost doubled in 2009 over what they were in 2008.  Therefore, I was little surprised to read that bankruptcies were up 32% in 2009. 

U.S. consumers and businesses are filing for bankruptcy at a pace that made 2009 the seventh-worst year on record, with more than 1.4 million petitions submitted, an Associated Press tally showed Monday.

The AP gathered data from the nation’s 90 bankruptcy districts and found 1.43 million filings, an increase of 32 percent from 2008. There were 116,000 recorded bankruptcies in December, up 22 percent from the same month a year before.

Continue reading...

2 Responses to Hard Times and Bankruptcy

  • “I am, for my sins no doubt, an attorney.”

    No, I’d say other people have to hire you because of their sins.:-)

    You do get a close-up look at the 7 Deadlies on a regular basis – I’m not sure how lawyers can avoid becoming deeply cynical.

  • “I’m not sure how lawyers can avoid becoming deeply cynical.”

    In my case Donna, because of a fairly robust sense of humor. I can see the humor in most situations, although admittedly that can sometimes be fairly dark humor.

2 Responses to Pension Wipeout

  • It is GM times 100,000. The tick tick tick under most local and state governments. Given the fact that at least a dozen states have publicly displayed their financial distress- CA, NJ, NJ, MI, others- root through the financial records and you will find this potential mess. Now switch to Washington and the administration of the Ponzi scheme that is Social Security. Which many experts will claim goes kablooey on or around 2016. You have a potential crisis that makes the current kerfuffles look trivial. Watch the next four to five years. There is radical change underway in virtually every major American institution. It is what Phila. Mayor Michael Nutter faces during his current round of community meetings to explain the $108 million tax revenue shortfall and why their neighborhood libraries, pools and rec centers will close. How ironic. Just before the Great and Handsome Apostle of Big Gummint assumes the Presidency, the Era of Big Gummint is coming to a screeching halt.

  • Quite right Gerard. I used to jokingly tell people that my retirement plan was to be carried dead from behing my desk at 85. Now I fear that my retirement plan may become a reality for many.