Detroit has filed for Bankruptcy. Among the opposition’s arguments against an organized restructuring of the city’s debt, are constitutional worries, pension concerns, and President Barack Obama’s reputation. (Or, “street cred” if you prefer.) A Michigan judge, in a stunning display of impartiality and balance, said the bankruptcy should be withdrawn in part because it failed to honor “the (United States) president, who took (Detroit’s auto companies) out of bankruptcy.” I’ll give you a moment to catch your breath and re-read that last sentence.
Most lawyers that have involved themselves in any number of bankruptcy cases would be quick to tell you that stroking the ego of the US President is rarely a prerequisite for filing. But, Judge Rosemary Aquilina ordered the bankruptcy be withdrawn because it failed to do just that. Oh, she also mentioned that the Michigan constitution disallowed any sort of pension fund restructuring. More on that in a minute.
Making the claim that President Obama saved the Auto Industry is like saying Neville Chamberlin saved Britain. At last check, the Treasury Department would have to sell roughly 190 million shares at nearly $90 per share for taxpayers to break even on Obama’s attempt at venture capitalism. GM is trading around $36 a share. Additionally, President Obama’s unprecedented insertion of the Executive Branch into bankruptcy proceedings for the auto giant came with a rarely reported $45 billion in write offs. (The book value was roughly $18 billion.) All of this says nothing to the fact that senior investors and preferred stock holders were pushed aside so that the United Auto Workers union could bear as little loss as possible. The President’s first attempt at running anything within the private sector cost the US taxpaying public a great handful of money.
Judge Aquilina’s argument, aside from her concern for our President’s reputation, is rooted in a provision in the Michigan Constitution that limits changes to pension plans. The Michigan constitution does, in fact, place restrictions on when, or if, pension plans can be resolved. However, Governor Rick Snyder has indicated that to the extent pension plans are funded, they will not be touched. Pension plans that are underfunded, however, will be examined in public by the bankruptcy court so that the city’s obligations can be resolved.
The larger question is “what are the alternatives?” While it would be nice to make sure everyone from bond holders to retired policeman get the full amount due, such an outcome is not possible with Detroit’s current revenues. This seems, to most untrained eyes, the exact reason bankruptcy courts were formed. Detroit’s obligations outweigh its ability to raise capital. And, while the Judge might be wary of a major city filing for bankruptcy, she would certainly do well to keep her personal adoration for the president out of the conversation.
Furthermore, the judge should be reprimanded for her accidental irony: President Obama, his bailout, his ideology, and similar liberal policies are exactly what Detroit has been living with for decades. Detroit is the consequence of every progressive initiative President Barack Obama, Nancy Pelosi, and the far left Democrats have pushed. Far from failing to “honor” the President, Detroit’s current circumstances are all that are left for Detroit citizens to honor liberalism. The once great Motor City, shines now as a beaming example of how Democrat ideas ultimately come to an end.
As for the court case? The Judge might have raised a constitutional objection to the bankruptcy that could be effective in certain courts (although we’ll leave that decision to a hopefully less biased judge). However, her argument is profoundly diminished by her apparent concern for Obama’s legacy. Detroit – as she clearly is unaware – is already the legacy of the left.