Like a broken clock taking its twice-a-day victory lap, the New York Times weighed in this morning on Detroit’s bankruptcy. The reason? It’s finger-pointing time. And, when money is the issue, the Times’ ink-stained fingers reflexively point to banks, all of which are big, bad, and beyond the reach of regulators. And now it looks like the Times’ suffers from an ink-stained brain too.
Our nation’s former “paper of record” today pronounced that “this much is clear”: (1) the banks that “abetted” Detroit’s profligacy will have to eat only 25% of their bad bets whereas the city’s pensioners will lose 90%, (2) “municipal officials are prey for Wall Street,” and, (3) the preferences shown to banks during bankruptcy proceedings are both “unfair and economically destabilizing.”
But those of us with ink-free brains need to focus on the facts and ignore the hysteria emanating from Manhattan’s West Side. As Detroit finalizes its descent into nothingness, you, wherever you live, will be expected to chip in. Municipalities have for years pushed labor costs into the future by promising more lavish defined-benefit pensions than the defined-contribution plans offered in the private sector. Don’t be surprised when your uninsured, hard-earned 401k becomes the apple of Detroit’s municipal unions’ eyes as they demand you share their pain. The banks, well-versed in these never ending government shell games, had the foresight to protect themselves. Bad banks!
And when a city elects Kwame Kilpatrick—he of the 25+ felony convictions—as its mayor, how can it then complain when Wall Street beats it at its own shady game? Kilpatrick seems to have spent most of his career as a predator, engaged in exactly the type of preying the Times accuses Wall Street of.
To give credit where due, maybe the Times had a point bemoaning the preferential treatment of banks in bankruptcy. Lenders will only lend when they have reasonable reassurance they will be repaid. Let’s put down our pitchforks and torches for a second and, as the first step in the Times‘ peasant revolt, abolish those annoying bankruptcy code preferences. That way no lender will abet the next one hundred Detroit’s who borrow themselves into the abyss.
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