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

Not the Mortgage Crisis, Not the Economy, but Foolishness! Greenhut calls it, in “Bankrupt cities suffer for officials’ foolishness”

“California’s exclusively Democratic leaders not only are unwilling to rein in the costs of benefits for their patrons, the public-sector unions, they have been erecting roadblocks in the paths of localities that want to fix the problem on their own. Yet all the political hurdles in the world cannot fix the basic problem of insolvency.”

Click to read the article at OC Reg, July 22, 2012

A test for state’s untouchable pensions Stockton, on verge of bankruptcy, running up against the 800-pound gorilla known as CalPERS

Some public pension experts think they know why pensions were not on the city manager’s list. They see the hidden hand of California’s giant state pension system, known as Cal-PERS, which administers hundreds of billions of dollars in retirement obligations for municipalities across the state.

CalPERS does not want cities like Stockton going back on their promises, and it argues that the state Constitution bars any reduction in pensions — and not just for people who have already retired. State law also forbids cuts in the pensions that today’s public workers expect to earn in the future, CalPERS says, even in cases of severe fiscal distress. Workers at companies have no comparable protection.  (Click here to read the article)

Gadfly Radio with myself and CalWatchDog airs today on at 10 am

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Ben Boychuk, associate editor at City Journal, John Seiler, managing editor at and special guest, Wayne Lusvardi, a regular contributor to and the author of the recently published Investigative Report up at CalWatchDog, Gleickgate Pollutes Enviro Movement.

Climate activist Dr. Peter Gleick of the Pacific Institute of water policy in Oakland may face criminal charges that he deceptively obtained data from a conservative think tank, the Heartland Institute, then “doctored” it and disseminated it on the web to libel that organization. Gleick has admitted he is the source of the leaked data but denies he produced the doctored document.

We’ll also talk with Wayne about his article posted Monday, Municipal Bankruptcy Stalks Stockton, a case study in why is it not a good idea for public sector officials to play Real Estate Developer? How bad can it be? I wouldn’t want to be the cat holding the bag when the value of properties has dropped over two thirds since 2007!

We’ll talk with Ben on the latest developments with the Parent Trigger and a new scandal perpetrated by the Teacher’s Union against the parents at Desert Trails School, what’s new at City Journal CA and his take on Lance Izumi’s new book, “Obama’s Education Takeover.”

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