Wave of US Municipal Bankruptcies Caused by Wall Street Predatory Interest Rates, not Pensions
By Thomas Gaist
Posted Feb 1, 2014
The political establishment and the media have relentlessly promoted the myth that the crisis in Detroit and in cities across the US is a product of overgenerous spending on social services and benefits, with public employee pension liabilities cited as the main culprit.
In reality, the driving force behind the Detroit bankruptcy has been a predatory interest rate swap foisted on the city by Wall Street bankers, which was signed by former Mayor Kwame Kilpatrick in 2005. Scores of states, municipalities, school districts and various other public entities entered into similar swap contracts over the past decade. These deals have enabled the world’s most powerful banking houses to systematically plunder public budgets across the nation, creating the conditions for the rising wave of municipal bankruptcies. In Detroit, Orr is seeking to pay Bank of America and UBS $165 million in termination fees, while offering only pennies on the dollar towards unfunded pension obligations owed to 23,500 retired city workers. More…