Orr’s Executive Order #17 sets dangerous precedent and exposes Detroit to more Wall Street predatory lending
DETROIT – City of Detroit Emergency Manager Kevyn Orr’s Executive Order #17 allows big banks and lawyers to step in front of Detroiters to collect first on city income taxes and casino revenues. Executive Order #17 proposes a $350 million Debtor in Possession (DIP) deal with Barclays Capital to pay off the termination fees on swaps with big banks Bank of America and UBS. Michigan Forward denounces this executive order, calls for the Detroit City Council to reject this deal and offer a counter proposal.
The DIP deal Orr, the city’s Emergency Manager appointed by Governor Rick Snyder, has worked out with Barclay’s is an unprecedented move in a municipal bankruptcy – Bond Buyer calls it the “first deal of its kind”[i]- and would set a dangerous precedent for municipal bankruptcies in the U.S., essentially allowing wealthy big banks to jump to the front of the creditors line while retired seniors are facing drastic cuts in the retirement income they depend on.
“US Bankruptcy Judge Steven Rhodes has told Bank of America and UBS that they can’t jump ahead of Detroit’s obligations to its retirees and pensioners,” says Brandon Jessup, C.E.O . of Michigan Forward Urban Affairs Group. Kevyn Orr’s proposal secures $250 million in ‘termination fees’ for the same bad interest rate swaps that sunk Detroit’s credit rating and finances in the first place. Detroit City Council must stand up for Detroit’s constitutional obligations first, not allow banks to bully them around. The issue brief released by our foundation, Michigan Forward, details the ills of Executive Order #17, and why Detroit City Council must reject it.”
“This is just another example of big banks pushing predatory deals onto cash-strapped cities,” said Saqib Bhatti, a fellow at the National Cummings Foundation. “The purpose of this special financing deal is to ensure that Bank of America and UBS can cash out on their swap deals with the city before a penny goes towards city services.”
Michigan Forward will join progressive partners including Detroiters Resisting Emergency Management (D-REM), Free Detroit/No Consent, Moratorium Now and Detroiters who support transparency, accountability and good government to address the pending Barclays deal for $350 million. Michigan Forward and allies called for the Detroit City Council to oppose Executive Order #17 Monday, October 21 at 11 a.m. in front of the Coleman A. Young Municipal Building. Predatory lending led by Wall Street banks and lawyers have cost the city over $1 billion dollars in the last decade.
Civic groups are joining in coalition to call for US Bankruptcy Court Judge Stephen Rhodes to reject the municipal bankruptcy filed by the State of Michigan on Wednesday, October 23, 2013. Progressive groups are calling for transparency and accountability throughout Detroit’s emergency management process. Detroiters are standing up for their homes, pensions and community to oppose the illegal and unconstitutional bankruptcy proceedings led by Gov. Rick Snyder and Detroit Emergency Manager Kevyn Orr. Detroit’s recovery and reorganization process must be led by the residents of the city of Detroit not corporate interests.