Let me get this straight. Obama ‘needed’ to save the automakers from bankruptcy, but sees the wisdom in allowing states to do so in order to “alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout“?
The reason why Obama refused to allow the automakers to restructure themselves through bankruptcy is due to the close relationship between the Democrats and labour unions. Bankruptcy is a second chance for failing businesses and yes, even states, to cut runaway spending and bloated bureaucracy, as well as allowing businesses to renegotiate labour contracts in order to face the new reality.
Since doing so would come at a cost to the unions themselves, and Big Labour pours millions into the coffers of the DNC, Obama nationalized the businesses and let the taxpayer foot the bill.
Bankruptcy is a good thing for failing enterprises, but letting the present government get involved in any scheme remotely related to overseeing debt and release others from it, is absolutely dangerous and foolhardy. If there’s talk of cutting over bloated bureaucracies which means streamlining government, as well as serious over sight from conservatives, then they might have a shot for public approval. KGS
NOTE: Just remember folks, Obama was against bankruptcy then, but in favor of it now, the question of why, is what serious journalists should be asking.
Path Is Sought for States to Escape Debt Burdens
Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.
Unlike cities, the states are barred from seeking protection in federal bankruptcy court. Any effort to change that status would have to clear high constitutional hurdles because the states are considered sovereign.
But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid.
Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides.
Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout. Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors.
“All of a sudden, there’s a whole new risk factor,” said Paul S. Maco, a partner at the firm Vinson & Elkins who was head of the Securities and Exchange Commission’s Office of Municipal Securities during the Clinton administration.