Public Act (PA) 436, which was pushed through by the Republican-controlled state legislature after voters defeated a similar measure in November, gives emergency managers in six Michigan cities and three school districts authority to slash budgets, reopen labor agreements, impose unilateral concessions and shut down or privatize city departments and services.
The measure is aimed at establishing what amounts to a financial dictator in Detroit, with the aim of using the city as a test case for imposing deeply unpopular measures in line with what is occurring in Cyprus, Greece and other European countries.
The entire political establishment, Democrat and Republican, is engaged in a conspiracy toward workers in the city.
Governor Rick Snyder, a multi-millionaire former venture capitalist and Republican, and Democratic Treasury Secretary Andy Dillon have turned over control of Detroit to a Washington, DC bankruptcy attorney whose former law firm represents the same Wall Street investment houses that control Detroit’s municipal bonds and other debt.
Kevyn Orr, a lifelong Democrat, is a former law partner of Cleveland-based Jones Day, which has represented Citigroup, UBS AG, JPMorgan Chase and other banks that hold much of the city’s $8.6 billion in long-term bond debt. His appointment immediately led to an upgrade in Detroit’s credit rating from negative to stable, as investors anticipated he would oversee their repayment by intensifying the attack on the working class.
Detroit’s Democratic mayor, David Bing, hired Orr’s former law firm as a “restructuring” consultant earlier this month before his appointment as emergency manager. Bing later claimed that this was “completely independent” of the governor’s decision to select Orr. While Orr resigned from the law firm, under the new law he will be responsible for hiring the firm he has worked at for years.
A lot of money stands to be made on the further ruination of Detroit. The Metro Times noted that among Jones Day’s former clients is the Bank of America. “According to Irvin Corley Jr., who heads the Detroit City Council’s Fiscal Analysis Division, Bank of America/Merrill Lynch is one of the counterparties in a complex credit swap deal that includes a stipulation where the city would be forced to pay lenders a $400 million lump-sum payment in the event certain ‘termination events’ occur. One of those triggers is the appointment of an emergency manager.”
Last November, Michigan voters overturned Public Act 4 by a margin of 52 to 48 percent. The act gave emergency financial managers financial and day-to-day control of cities and school districts deemed financially troubled.
In response, the Republican state attorney authorized the reinstatement of PA 72, a law passed in 1990 that allowed for the appointment of emergency financial managers, who had less sweeping powers than those allotted to emergency managers. The automatic reversion to the earlier law was done on dubious if not illegal grounds.
Republican legislators then drafted a new bill, PA 436, differing from the act that was overturned only on minor points. The act gives elected officials the “choice” of one of four options to slash services and jobs if the state determined a financial emergency exists. These are: signing a consent agreement, allowing the takeover by an emergency manager, going through a mediation process or declaring bankruptcy.
Exploiting the fact that the law did not take effect until March 28, Snyder and Dillon declared Detroit to being in a state of financial emergency and appointed Orr last week, thereby circumventing the requirement that cities have the opportunity to choose their poison. In other words, the timing of the appointment allowed the state to insist on an emergency manager, while this manager would, within days, assume the full powers provided by PA 436.
via www.wsws.org
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