Judge Rhodes to Detroit: DON’T Pay the Banksters!
By Tom Stephens
On Jan. 16, in the Detroit federal bankruptcy court, Judge Steven Rhodes issued a decision that promises a measure of justice in the face of Wall Street banks’ toxic threat that they are supposedly “too big to fail” (or jail). Judge Rhodes denied payments of over $169 million to Bank of America/Merrill Lynch (BAML) and UBS. The motion to pay the banks was filed by Jones Day lawyers, supposedly representing Detroit and working in our best interest. The judge’s decision against the payment proves otherwise.
BAML and UBS were among the Wall Street predators whose massive frauds caused the housing crisis, the economic crash of 2008, Detroit’s unprecedented neighborhood vacancies and blight after they drove People out of their homes, and the city’s financial crisis because of the resulting losses of tax revenue. They are also clients of the giant Jones Day law firm.
Kevyn Orr was a senior partner with Jones Day, until the very day Gov. Snyder made him Detroit’s one-man local government under Snyder’s emergency management statutes. Jones Day sought a lucrative contract as Detroit’s “restructuring counsel” because for them this civic disaster is a business development opportunity. Then they filed Detroit’s Chapter 9 municipal bankruptcy. The implications of the Jan. 16 ruling are truly extraordinary.
Indeed, this was the second time Judge Rhodes told Jones Day’s $1,000 per hour lawyers and Orr not to pay BAML and UBS their claimed “termination fees” for toxic interest rate “swaps” — predatory Wall Street instruments of financial destruction. The first time Orr and Jones Day wanted to pay them over $230 million. That money would have come out of the shares of hard-working and by no means wealthy Detroit retirees as well as city services for residents. Instead of rewarding the Jones Day bankster clients for their predatory misconduct, Judge Rhodes’ order as a practical matter rendered their claims “unsecured” like others in bankruptcy.
But the more significant immediate issue is this seems to be the final proof that Jones Day and Orr do not really represent the best interests of Detroit or its people. What does it say about these lawyers and the one-man “emergency” local government forced on us by Gov. Snyder, that they have now twice been told by the bankruptcy judge they improperly tried to sell us out to their other clients for hundreds of millions of dollars? After being denied once by the court, they went into a back room on Christmas Eve 2013 and tried to do it again!
As this long-running neoliberal racist extravaganza churns into February and beyond, Orr has recently issued a top-secret first draft “plan of adjustment” to creditors; filed a massive suit against the Detroit retirement systems and “service organizations” created to facilitate the fraudulent “swaps;” and is reportedly now trying to work out yet another deal with BAML and UBS for their end of the scam. If no deal is reached, more litigation is said to be possible. The price may be declining, but the Jones Day policy of selling out Detroit to their bankster clients remains the same.
Detroiters have the basic right to competent and loyal legal representation, as well as democratically accountable local government, as we proceed through the largest municipal bankruptcy case in U.S. history. Jones Day and Orr are mercenaries plagued by conflicts of interest, who have repeatedly demonstrated their lack of candor, integrity and faithfulness to our interests. They should be fired and replaced by competent professionals who are in a position to truly represent Detroit.
Judge Rhodes’ decisions undermine the legitimacy of Wall Street’s claims on Detroit’s assets. Cancellation of the debt allegedly “owed” to the banks by Detroit, not merely moving it into an unsecured position, should become part of the public dialogue over the future of Detroit.
As the plan of adjustment is made public, and Detroiters from all walks of life engage more directly and militantly with the unjust pillage and dictatorship forced on us by Snyder, these bungled attempts to address the crisis are creating new opportunities for us to build a new city. We need a different approach from the bail-out-Wall-Street-at-all-costs policy of Snyder and Jones Day. Everyone agrees things need to change. Detroiters are coming together with our neighbors to resist this abuse and help make our city work for us.
Tom Stephens is a coordinator of the communications working group of Detroiters Resisting Emergency Management (D-REM). Their web site is: d-rem.org