-- Connecting the dots between our economy, government and business --
Summary and audio linked here.
Chicago’s political leadership is floating a pension buyout program as evidence it is seriously addressing the city’s thirty-six-billion-dollar unfunded pension liability, but Mark Glennon, founder of the Illinois policy research organization Wirepoints, said that the proposal moves debt from one column to another rather than reducing it, and that the broader fiscal picture facing the city continues to deteriorate across every measurable dimension. Audio here.
Expect no retraction or apology. This what they do.
The state’s existing buyout program for its own pensions is the precedent for Chicago, which should be a warning: Look out for similar exaggerated claims and shoddy analysis.
Full interview and summary linked here.
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Think revenue bonds for transit or Skyway. Repayment comes from bus fares or tolls. Are bondholders subordinate to claims for passenger injuries or potholes? Union drivers and toll collectors will find ways to extort and skim. Bond buyers may be too dumb or greedy to evaluate risks. Lawyers and underwriters win again. Sow’s ear for the gullible rich. You can fool enough of the people some of the time – one is born every minute.
Amtrak tried to issue debt to pay for current expenses back in the 1990’s. It didn’t take long for their ‘glide path to self-sufficiency’ to crash and burn.
Like a college kid who gets his first credit card and goes nuts with it, political animals are swiping the taxpayers’ credit card to pay for their ‘priorities’. Then these same crooks take on more debt to pay for the credit card bill. Then they take on yet more debt to pay the interest on the existing debt. Wash. Rinse. Repeat.
This never ends well.
Borrowing money to pay for current consumption is a sure way to go broke. A bigger mystery is who lends money to an entity without a mechanism that generates the income required to pay it back with interest? Am I missing something here?
That is curious. In the event of bankruptcy, could the bondholders take over debtor-owned real estate? Perhaps, their object is to acquire certain parcels.
China
The Bond Rating agencies are the joke. Bond Rating agencies and their employees need some moral hazard here in order to accurately rate any Chicago bonds based upon the very real risk of default. Instead of the “investment grade” status Chicago Bonds should be accurately listed as ‘junk” and pay obscenely high interest rates as a result. if the rating agencies miss this rating and likely future default then they go out of business and the employees of the bond rating agencies lose their savings and pensions in a clawback. Until then the bonds are simply a criminal farce and… Read more »