Bondholders should be able to sue to city commissioners who are, after all, responsible for the fiscal state of the city and the default on the bonds.
If bond holders take the hit then you can bet these cities and other financially shakey California cities will find it impossible to raise money via bonds in the future. Thus, taxpayers will get hammered even harder. It would be a good time for anyone living in such a city to sell their real estate and get the heck out of Dodge because property taxes are going to skyrocket.
Municipalities; GM; other companies with unions. We see this more and more. Politically connected groups get paid first despite what the law says about bondholders and secured creditors. The rule of law and the enforceability of contracts is being further undermined, and we are turning into a thugocracy like Russia as a result. Any fool who buys municipal bonds after this deserves what he gets.
The Municipal Bond market is going to crash and burn if they do this.
People put their money into these bonds because they are considered a safe investment. The return on the investment after inflation is generally 0%. But if this goes through, then these municipalities will never again be able to fund their profligate spending through the sale of bonds.
Maybe this will be a good thing.
They must have run out of other peoples’ money..........
Holy crap, imagine investing in City bonds for a City that screwed its LAST bondholders to payoff $$$ city union retirees?
'Sorry we cant pay the (home) mortgage again this month because Christmas is coming and we promised the kids some really good presents this year'
The Stockton and other looming municipal bankruptcies will likely collapse the municipal bond market and, equally likely, provide rich opportunities for skullduggery. Wealthy supporters of our corrupt administration cook up a deal with the Chicago thug. The said wealthy donors snatch up Stockton bonds at ten cents on the dollar on the q.t. After a suitable interval, Obama engineers a deal to have the Fed save the bondholders, paying them, say, 75% of par. Stockton is saved! Soros and Buffet pocket hundreds of millions in windfall profits! This is, in fact, a time-honored mode of getting fabulously wealthy off the misfortune of others in our great nation.
Pay the unions, burn the bondholders.
Sounds like GM......the new standard of excellence : )
The “tax exempt” status should be removed from ALL governmet debt; it is just one more encouragement that polticians have in creating excess debt in the first place - because they can attract investors with the tax exempt earnings; something denied to private borrowers and something that ought to be denied the politicians. The argument that we would be paying “more” interest makes the erroneous assumption that we need and would be making us much borrowing even though the interest rate we had to pay was higher.
Calpers is a giant government monopoly in California. No matter what any municipality in California did wrong, I have no sympathy for Calpers. Like Freddie and Fannie it should be “sold off in pieces” to a bunch of newly privatized non-profit, non-polictical pension investment outfits that afterward any enterprise, governmental or non-governmental was free to participate in, or not, as they chose. I say “non-profit” because like the old “mutal” insurance company model the “owners” are the policy holders and all “gross profits” (capital gains and investment earnings) minus all needed operations costs and reserves that should not be distributed accrue to the pension accounts of the pension policy holders - they are the investor owners. And, as with any “mutual” insurance company it does not mean it is not competitive or not out there competing for business.