Bankruptcy is supposed to be bottom, and a new beginning–Unless it’s used to favor and further plunder

LA WATCHDOG – In a stunt that would make South American strongman Hugo Chavez proud, the imperious California Public Employees Retirement System (“CalPERS”) and the bankrupt City of Stockton conspired to give an absolute preference to Stockton’s $147 million pension obligation ($245 million over the next ten years) to CalPERS over Stockton’s remaining creditors who are owed an additional $550 million.

But this sweetheart deal where bondholders and other creditors are treated like dirt will have major ramifications in the markets for California bonds and notes as credit rating agencies will lower their ratings and investors will require greater security and significantly higher rates of returns on these higher risk investments.

Click here to read Jack Humphreville’s latest piece at City Watch, posted Aug 16, 2012 Jack Humphreville