OBAMANOMICS: Unions Trump Bondholders, Again

Guest post by Tyler Durden

First, the Obama administration showed during the course of the GM and Chrysler bankruptcy proceedings, that when it comes to Most Preferred Voter classes, some unsecured creditors – namely labor unions, and the millions of votes they bring – are more equal than other unsecured creditors – namely bondholders, and the zero votes they bring. Five years later we are about to get a stark reminder that under the superpriority rule of a community organizer for whom “fairness” trumps contract law any day, it is now Detroit’s turn to make a mockery of the recovery waterfall. As it turns out, bankrupt Detroit is proposing to favor pension funds at roughly double the rate of bondholders to resolve an estimated $ 18 billion in long-term obligations, according to a draft of a debt-cutting plan reviewed by The Wall Street Journal.

The breakdown to unsecured stakeholders would be as follows: 40% recovery for pension funds, 20% for unsecured bondholders – all this to the same pari class of unsecured creditors. Because just like in Europe when cashing out on CDS in insolvent nations is prohibited as it would suggest that the entire Eurozone experiment is one epic farce, regardless of how much “political capital” Goldman Sachs has invested in it, so in the US municipal creditors are realizing that in the worst case scenario, they will be layered first and foremost by all those whose votes are critical in keeping this crony administration in power.

According to the WSJ the plan calls for recovery to be divided among the unsecureds amounting to $ 4.2 billion, more than the originally planned $ 2 billion to settle claims which included about $ 11 billion in unsecured debt, including $ 6 billion in health and other benefits for retirees; $ 3.5 billion for retiree pensions; and about $ 530 million in general-obligation bonds.

There is a possibility that final “math” in the Plan of Reorg is changed before the final draft.

It was unclear from the plan reviewed by the Journal whether the city is using all of the same estimates for the money owed to unsecured creditors in its draft plan. A person familiar with the draft plan said the recovery rate for the pension funds could end lower than the balance sheet shows.

Details of the plan sent to creditors on Wednesday have been kept under wraps as the city and its debtholders continue to talk in closed-door mediation. The city sent its working draft to creditors in the hopes that the plan with a richer payout might spur some of them to settle with the city individually or, in the least, offer their own suggestions toward modifying the overall proposal, according to another person familiar with the matter.

The formal plan is expected to be filed in federal court in Detroit within two weeks, officials said. Creditors will vote on the plan, but the final decision rests with the court.

Still, the probability is that Kevyn Orr has finally gotten cold feet on playing hard ball with the unions. “The proposed plan provides the road map for all parties to resolve all outstanding issues and facilitate the city’s efforts to achieve long-term financial health,” Detroit Emergency Manager Kevyn Orr said in a statement Wednesday. Mr. Orr’s spokesman declined Thursday to comment on the plan’s details. Several creditors, who were opposed to the city’s early plans to offer creditors, including bondholders and pension funds, less than 20 cents on the dollars owed to them, also declined to comment.”

One can only imagine the amount of “Steve Rattnering” that must have gone on behind the scenes, and how much more is still set to happen, for such a skewed plan to pass the bankruptcy judge over creditor objections. Which it will once the president makes a phone call.

Then again, with contract law abrogated as was made very clear with this administration’s first steps into the “Fairness Doctrine” back in 2009 and the bankruptcy of GM and Chrysler, nothing can, or should, surprise one any more.

Read more at Zero Hedge

Doug Ross @ Journal

Celente Warns Of Coming Riots: “The Collapse Is Engulfing The World”

riots-engulf-world

He accurately predicted the trends that have shaped the last decade. Ahead of the collapse of 2008 his Trends Journal newsletter issued a forecast that stock markets, which had just hit all time highs, would buckle in the first quarter of the year and that an unprecedented recession would blanket the global economy. He said the decline in  financial markets would then be followed by disillusionment in America’s political and economic systems, leading to the rise of a third-party and widespread protests across America. And while officials the country over tried to assuage fears in the populace, he cautioned that the middle class would continue to be destroyed through taxation, regulation and fiscal incompetence.

His foresight was 20/20.

Now, renowned trend forecaster Gerald Celente warns that, despite establishment claims of recovery and growth, things are about to get a whole lot worse.

Celente isn’t suggesting that a massive collapse is going to happen in the future.

He says we’re already in it – and it’s taking hold right before our eyes across the entirety of the globe:

This selloff in the emerging markets, with their currencies going down and their interest rates going up, it’s going to be disastrous and there are going to be riots everywhere…

So as the decline in their economies accelerates, you are going to see the civil unrest intensify.

If you want to know a business that will thrive in 2014, it may well be guillotines because these are ‘Off with their heads’ moments.

Meanwhile, they just passed laws in Spain to stop people from protesting.  But all the laws in the world do not feed starving people.  All the laws in the world do not put roofs over people’s heads. 

That’s why you are going to see heads roll.

you can already see chaos engulfing the world as the Fed’s global financial scheme is collapsing.  This collapse is engulfing the entire world, from Russia, to South Africa, into China and emerging markets across the globe. 

Full Interview at King World News (also available in audio broadcast)
via Steve Quayle

Should protesters in the U.S. threaten the status quo in any way they will be dealt with like the people who took to the streets in the Ukraine, Egypt, Iran, and Greece.

In fact, a Federal court recently upheld Congressional legislation passed in 2012 that allowed the herding of protestors into so-called “free speech” zones, and to charge those who assemble at “official functions” designated as areas of “national significance” with federal crimes punishable by one year in prison.

Under that verbiage, that means a peaceful protest outside a candidate’s concession speech would be a federal offense…

Carefully controlled protests involving individuals who have been bused in by their respective political party or union leaders are often televised by the mainstream media in an effort to give Americans a false sense of freedom.

When these protests turn to uprising and riots because millions of people can no longer keep a roof over their heads or food in their bellies, you can bet that those involved will be dealt with swiftly and behind the cloak of terrorism secrecy laws like the National Defense Authorization Act which essentially gives the government the right to detain anyone, for any reason, for an indefinite amount of time.

But the real question here is, why would the government need laws like this?

Why would they be war-gaming and simulating economic collapse scenarios and civil unrest?

Why are they continuing to borrow trillions of dollars from foreign creditors and injecting the domestic economy with tens of billions of dollars on a monthly basis?

The only plausible answer, given the current economic climate in America and sentiment on Main Street, is that the authorities at the highest levels of our government know that something very bad could happen.

And they confirmed this in two letters issued by two different Treasury Secretaries over the last several years. Most recently, the Treasury department noted that failure to satiate our nation’s never ending appetite for debt would have a “catastrophic effect” on our economy:

Credit markets could freeze, the value of the dollar could plummet, US interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse.

Not only might the economic consequences of default be profound, but those consequences, including high interest rates, reduced investment, higher debt payments, and slow economic growth, could last for more than a generation…

The fall-out from our current economic climate is going to be unprecedented. For those who deny this is happening, understand that the above warning comes directly from our Treasury Department. They’re the money guys. And they are telling us what’s going to happen.

And be assured it won’t just be stock markets that drop precipitously.

What we’re talking about here is the collapse of the economy of the United States of America – the richest nation on Earth. 

The consequences will be devastating on every level and those of us on Main Street will be taking the brunt of the impact.

Imagine a situation where jobs continue to be shed by the hundreds of thousands every month without abatement. A situation where the price of basic essentials like energy and food rise without restraint. A situation where medical care is so expensive that average Americans will go bankrupt trying to pay for government mandated coverage. A situation where whatever money you do have in savings becomes worthless because our currency loses credibility around the world.

This is what’s happening right now.

The scary version: There is no way to turn this around. It’s just going to get progressively worse.

If you haven’t taken steps to prepare – to insulate yourself for an economic end of the world as we know it – then life for you and your family is going to be horrific.

This is the depression.


SHTF Plan – When It Hits The Fan, Don’t Say We Didn’t Warn You

BUMMER FOR CLIMATE KOOKS: Final Keystone XL Pipeline Report Reveals No Major Boost in Greenhouse Gas

Guest post by Deena Winter

LINCOLN, Neb. — The U.S. State Department’s final environmental review of the proposed Keystone XL oil pipeline mirrors earlier conclusions that the pipeline wouldn’t significantly contribute to greenhouse gas emissions.

The report reiterated last year’s draft report conclusion that the pipeline is unlikely to significantly impact the rate of extraction of oil sands or the continued demand for heavy crude oil in the U.S.

Now that the State Department’s environmental review of TransCanada’s application for a federal permit to build the pipeline is complete, a 90-day review by various federal agencies will commence to determine whether the pipeline is in the national interest, since it crosses a national border. The final decision is expected to be made by Secretary of State John Kerry and President Obama.

Canadian pipeline company TransCanada first applied for permission to build the pipeline in late 2008, but it ran into a wall of opposition in Nebraska. Nebraska pipeline fighters have taken part in and helped organize protests from the governor’s mansion to Washington, D.C., even as most of the Republican statewide public officials have pushed for approval.

The Keystone XL pipeline would bisect Nebraska, with nearly 200 miles of pipe buried in a dozen counties. A grassroots group called Bold Nebraska has battled against a foreign company having the power to take land from landowners and possible contamination of the massive Ogallala Aquifer by oil spills.

Pipeline opponents successfully lobbied Obama to reject TransCanada’s initial application in late 2011 and forced the company to reroute the pipeline around the ecologically fragile Sandhills. That’s the route reviewed in the latest State Department reports.

The new report noted that most pipeline spills are small: of the 1,692 incidents between 2002 and 2012, 79 percent were small (up to 2,100 gallons) and just 4 percent were large spills where the oil would migrate away from the release site. It also said modeling indicates “aquifer characteristics would inhibit the spread of released oil, and impacts from a release on water quality would be limited.”

Pipeline opponents in Nebraska have questioned why TransCanada didn’t build the pipeline parallel to its existing Keystone One pipeline that crosses eastern Nebraska, away from the Sandhills and aquifer. The report noted this, but concluded it wasn’t a reasonable alternative because it wouldn’t meet Keystone’s contractual obligations to transport 100,000 barrels per day of crude oil from the Bakken oil play in North Dakota. Also, the corridor would be longer, increasing the risk of spills.

The proposed pipeline has put Obama in a difficult position where he must decide whether to live up to his promises to combat climate change or appease labor unions that generally support the pipeline and jobs it would bring. Obama said last year the pipeline should only be built if it doesn’t increase carbon emissions.

Russ Girling, TransCanada president and chief executive officer, told reporters Friday that while opponents will continue to make noise, “The science continues to show that this pipeline can and will be built safety.”

“This pipeline certainly is in the national interest of the United States,” he said.

Bold Nebraska Executive Director Jane Kleeb saw victories in the fact that the report acknowledged the revised route still crosses the Sandhills, which she called a “big shift” from earlier reports. Environmental groups vowed to keep the pressure on Obama to reject the project.

“Our side continues to gain ground because landowners and environmentalists are now working together,” Kleeb said Friday.

Regardless of the president’s final verdict, a Nebraska lawsuit could still throw another obstacle in the path of the proposed 1,179-mile pipeline. Landowners who oppose the pipeline sued the state, challenging the constitutionality of a law that changed the pipeline route approval process, giving the governor and state environmental regulators the authority to approve or deny the revised route through Nebraska, rather than the Public Service Commission.

If the route review process is deemed unconstitutional, TransCanada would have to go back to square one with siting. A district judge hasn’t yet made a ruling after a one-day trial in September.

 
Contact Deena Winter at deena@nebraskawatchdog.org.

Doug Ross @ Journal