Headline News
Hoffa: Detroit’s Creditors Are Morally Bankrupt
By Teamsters General President James P. Hoffa
Published in the Detroit News, September 10, 2014
Detroit city worker retirees have given more than their fair share when it comes to making pension concessions. So have current municipal employees. Together, they helped Motor City officials earlier this year cobble together a “grand bargain” as part of the city’s bankruptcy plan. But evidently, that’s still not enough for some.
Bond insurer Financial Guaranty Insurance Co. — and until Tuesday, Syncora — is challenging the settlement as part of Detroit’s ongoing bankruptcy trial. Their sights are set largely on the artwork owned by the Detroit Institute of the Arts (DIA), arguing that creditors would get a much larger check if a judge forced a sale of the museum’s holdings. Syncora has reportedly reached a deal with the city to end its holdout.
The challenges overlook the fact that DIA donors joined with nonprofit foundations and the state of Michigan in agreeing to chip in some $816 million over the next 20 years to reduce pension cuts as part of an agreement to transfer the museum over to a charitable trust.
And it doesn’t take into account Detroit supporters’ and its own residents’ efforts to save part of the city’s cultural soul.
After all, what is a city without its institutions?
These bond insurance giants — part of a U.S. financial system that bilked billions out of hardworking Americans — have made it clear they believe receiving 75 percent of their investment back is fair.
But why should their desires trump those of hundreds of thousands of residents who live and work in Detroit?
Financial Guaranty and Syncora gambled when they took on $1.4 billion in city debt.
They lost. They are professionals who weighed the risk of their investment and decided to go ahead with it anyway.
The people of Detroit shouldn’t be on the hook for private sector investment. There is no doubt if the deal had gone well, these two firms wouldn’t have shared the bounty with Detroiters.
Just as it wouldn’t have been fair for Detroit to expect workers to carry the full cost of bankruptcy, it is equally unjust for financial firms to doom this deal and return the burden to the backs of Michiganians. Workers have paid enough for Wall Street mismanagement.
Current and retired Detroit workers signed off on cuts to their salaries and pensions.
Municipal employees had seen their salaries frozen or even slashed in some cases, but came to an agreement with the city on a five-year path forward.
Meanwhile, general pensioners voted to accept a 4.5 percent cut to their checks, a reduction in cost-of-living adjustment (COLA) increases, and in some cases cuts to bonuses.
Public safety pensioners agreed to COLA cuts.
These regular working people — about 30,000 in all — are doing their fair share. They have contributed to Detroit’s effort to cut some $7 billion in unsecured debt. Most creditors have agreed to the proposal. But Financial Guaranty is letting greed cloud its judgment.
The financial world has repeatedly ravaged the working and middle classes in recent years. But some are still not satisfied. These bond firms, however, should not be shielded from a community-wide effort to bolster Detroit.
The public and private sectors have joined together in an attempt to save one of America’s great cities. Here’s hoping the courts don’t allow that to be overturned.