Tuesday, May 27, 2014

Money For Detroit Is Clearly a Bailout

Money For Detroit Is Clearly a Bailout [Mackinac Center]:
"The reason that this payment is a bailout and not a settlement is simple.
People “settle” when one party insists that they have a claim against the other.
When a homeowner sues a contractor when their roof collapses, the contractor may pay to settle their dispute.
Detroit is asking for something different. 
It is asking the state for assistance to pay its debts. 
That’s a textbook bailout.
The city is not asking for the state to pay all of its debts.
That is why this deal is a partial bailout.
Gov. Snyder may want to claim that this bailout releases the state from any obligations over state constitutional pension protections.
Yet the responsibility for pension obligations ultimately lies with the city.
The constitution makes pension obligations contractual obligations of the city, and these responsibilities have been deemed to be subject to federal bankruptcy rules that are fundamentally about abridging contractual rights.
(Besides, the constitutional language was also meant to prevent pension underfunding, and that was clearly a breach in the city’s responsibility.)"

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