Birmingham on the brink (of bankruptcy)

CNN Money / Fortune Magazine ^ | October 15, 2008 | David Whitford

[bamahead]

With $3.2 billion in debt, the county that is home to Alabama's largest city is about to go bust. How the credit crisis went South.

Bob Riley wanted to help. It was Sunday, Oct. 5, and the Alabama governor was on the phone with Neel Kashkari, a Treasury Department official who the next day would be named by Treasury Secretary Hank Paulson as interim leader of the government's just-approved $700 billion Troubled Asset Relief Program. But Riley couldn't wait for Kashkari's role to become official. He needed to impress upon the new bailout boss the seriousness of the exploding financial crisis in Jefferson County, home to Birmingham...

The county has fallen hopelessly behind on payments to service the $3.2 billion it borrowed - on reckless terms - from Wall Street over the past decade to build a new sewer system...

According to a study by the law firm Mintz Levin, since the bankruptcy laws were written in 1934, there have been fewer than 600 filings for Chapter 9, which provides for the reorganization of municipalities. That's about how many private sector Chapter 11 filings occur, on average, every two weeks. Local governments using stable tax income to pay off money borrowed at a fixed rate may not be sexy, but over history this arrangement has tended to be a pretty reliable bet.

But the saga of Jefferson County stands apart. Unlike previous municipal meltdowns, it is a financial disaster that was to a large degree invented, packaged, and sold by Wall Street. And there are striking parallels to the wider credit crisis that has enveloped the financial world - with overeager borrowers, willing enablers, and dangerously complex financial instruments...

[bamahead]

ping

[RobertoinAL]

Keep watching. Montgomery will be next!

[The Duke]

I say we get Paulson to write ‘em a check. It’s all “funny money” anyhow, isn’t it?

[patton]

The part where they spent $20M to back the boring machine up mad me LOL.

[RobertoinAL]

Gov. Riley has already asked the Feds for some of the $700B to bailout the sewer mess. HE HE Sewer mess!

[whipitgood]

Over $3BILLION for a sewer system? That’s a lot of shi.....never mind!

[Lurker]

The county has fallen hopelessly behind on payments to service the $3.2 billion it borrowed - on reckless terms

Pardon the pun, but this was the money line right here.

And let me guess; Birmingham is run largely by Dems.

L

[RobertoinAL]

Oh yeah, Dem mayor, Dem city council.

[MeanWestTexan]

Larry Langford, Democrat and Harvard graduate. Langford and two associates were investigated by the Securities and Exchange Commission for actions which occurred during his tenure as County Commission president involving allegedly illegal transactions which steered County bond business to particular companies in exchange for bribes.[4][5] On April 30, 2008, the Securities and Exchange Commission sued Langford in federal court.The lawsuit alleges Langford accepted more than $156,000 in cash and benefits from Montgomery banker Bill Blount in exchange for county bond business. Ironically, Jefferson County senators on the same day approved bills by a 6-1 vote that would give Birmingham's mayor a $40,000 pay raise in the next term.

[MeanWestTexan]

I think Langford may be Obama’s daddy.

They certainly have similiar financial accumen.

[Tuscaloosa Goldfinch]

Yep. I think the mayor has scrapped his plans to “put a laptop in every backback” and has decided on European style fountains .

[Lurker]

All that and CNN manages to blame Wall Street for Birmingham's problems.

Sounds to me more like a corrupt City government is at fault.

But that would require actually pinning some responsibility on a black Democrat, and we all know:

L

[baldisbeautiful]

Not to be picky but, technically speaking, the title is wrong. It’s Jefferson County that is about to go bankrupt. Not really a big difference... still the same corrupt democrats.

[Terry Mross]

This is the first of many southern cities that will fall because of who’s been elected to run them over the last 20 years or so. Just fact.

[bamahead]

Larry Langford = crook. He apparently found some shady people on Wall Street to run a scheme with him this time.

He’s been running muni-bond rackets for decades in B’ham, almost since my folks were in high school.

The first big one was an amusement park called Kiddieland - built on the Alabama State Fairgrounds. Langford was the Mayor of Fairfield (a suburban community) at the time.
It was cheaply built, the tops were skimmed on everything, it failed miserably, and investors who bought bonds were left with worthless notes.

20 years later he did the same thing on a grander scale with ‘Visionland’....Birmingham’s supposed answer to Six Flags. Again - built cheap, massively skimmed, utter failure, investors got squat. That park is still around - not sure what it’s called these days.

Also see the Healthsouth trials. His name is all over that failure too, him and Scrushy were buds.

I’m sure he’ll be screaming racism at CNN by sundown. That seems to be his standard rhetort any time he’s accused of being shiftless, which is of course how he gets away with it. The media in B’ham won’t touch him of course.

I hope he gets 50 years.

[decimon]

In Birmingham they loved the Governor - oo, oo, oo.

[goodnesswins]

I won’t read the article....I’ll just guess....the City of Birmingham is run by DEMOCRATS!!!

[southernnorthcarolina]

I won’t read the article....I’ll just guess....the City of Birmingham is run by DEMOCRATS!!!

Well, you should at least read the thread, then. As pointed out above, it is Jefferson County, not the city of Birmingham which lies within it, which is near bankruptcy. I don't know who "runs" the county, but the County Commission is under GOP control.

[rabscuttle385]

Ping!