Largest U.S. Municipal Bankruptcy Looms in Alabama

Commentary by Joe Mysak

April 11 (Bloomberg) -- They're talking more about Chapter 9 municipal bankruptcy in Jefferson County, Alabama, the home of the largest city in the state, Birmingham.

Who can blame them?

The county is now being whipsawed by an ill-thought-out debt policy and the collapse of the bond insurers. Credit-rating downgrades all around have triggered a series of events that are no longer in the county's control, leaving it at the mercy of securities firms that have little room for maneuver themselves.

This has produced a steady series of stories in my new favorite newspaper, the Birmingham News, all about how the county is preparing to declare bankruptcy any day.

Perhaps the best article ran on Sunday, April 6. It began: ``Jefferson County officials have laid the groundwork for the largest municipal bankruptcy in the nation's history while publicly saying they have no imminent plans for a filing.''

The one that ran on Wednesday, April 9, was no less compelling: ``Talks on the sewer system's debt crisis aren't making progress, increasing the odds that the county will file municipal bankruptcy, Jefferson County Commission President Bettye Fine Collins said Tuesday.''

This is how it ends for the little county that was going to teach America how to use interest-rate swaps.

Make no mistake. This is a story all about public finance and ``derivatives,'' whose use by states and localities exploded during the past decade.

Orange County

The Jefferson County bankruptcy, if it comes, and it's hard to see how it can be avoided, will eclipse that of the 1994 filing by Orange County, California. ``Derivatives'' are at the center of both death-spirals.

Orange County invested in them -- securities whose value was tied to other securities and markets. The county investment pool, which for years spun off handsome returns for the school districts and local governments that were its participants, found itself holding a bunch of junk when its investors asked for their money back.

Jefferson County played the derivatives game as part of financing a $3.2 billion sewer cleanup. The county engaged in a batch of interest-rate swaps with the banks that helped underwrite the debt, in a strategy designed to save the county and its taxpayers some money. The strategy backfired, demonstrating the speculative, risky nature of swaps.

Two Acts

The bankruptcy will be the biggest in the municipal market's history by virtue of the county's debt load, according to the News. Jefferson County has $3.2 billion in sewer debt; Orange County lost $1.6 billion in its investment pool. I'm sure the matter will be debated. I'm also sure Orange County will be happy to pass the crown to Jefferson County.

There are going to be two acts to this drama.

First, of course, is the actual filing itself. The county seems to think that this will allow it to hold its creditors at bay and proceed in a business-as-usual fashion.

County officials have stated they have no intention of cutting back services or raising taxes or sewer fees. The most the county seems willing to do is to earmark part of a school construction sales tax to pay off its now-overdue debt.

``We are dealing with a virtual immovable force on Wall Street,'' the News quoted Commissioner Collins as saying.

I have a feeling that it's not going to work out precisely this way for Jefferson County and its residents. Every municipal bankruptcy is different, as is everything else in Muniland, but go ask Orange County how Chapter 9 worked. It's not going to be painless, no matter how well it's planned out.

The Bottom

The first act is humiliation. The second is recrimination.

The second act of the Jefferson County bankruptcy is going to focus on Wall Street and all the banks, law firms, advisers and consulting firms that helped put the county where it is today. The county was not well-served, for all the money that changed hands. In this act, the county sues to get some of that money back.

And there was a lot of money, which seems to be at the heart of the Securities and Exchange Commission's inquiry into the county and its infatuation with swaps and derivatives. The agency has said it is looking at pay to play, or bankers and others forking over cash in exchange for jobs.

The SEC's investigation is just part of a larger probe into the reinvestment-of-proceeds business across the municipal market in general. This has been going on for years, but there are signs it will erupt with a barrage of criminal prosecutions.

The stock-market guys say you have to reach a bottom before you can recover, and that a bottom is often signaled by the collapse of some big entity. Many people thought it was Bear Stearns Cos. In reality, it's Jefferson County.

(Joe Mysak is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: Joe Mysak in New York at jmysakjr@bloomberg.net

Last Updated: April 11, 2008 00:01 EDT

EVANGELICAL 'CHRISTIANS' ARE FULL OF SOMETHING ELSE OTHER THAN JESUS

“They believe in God’s word in the Bible and in God’s promise to the Jewish people that the land of Israel belongs to the people of Israel…”

That quote among others can be found in THIS report about megachurch pastor John Hagee’s visit to the Holy Land.

These so-called Christians are literally celebrating on the graves of Palestinians murdered by the very state they so adore. They are here to celebrate the 60th anniversary of the founding of Israel without a glance at the suffering that resulted from that founding..

They sing, they dance, they bask in the ‘Glory of the Lord’….. what about the Palestinians? Do they really believe them to be ‘children of a lesser God?’ Where were they when a siege was placed on Gaza resulting in starvation, a medical crisis, a systemised plan to ethnically cleanse an entire nation off the face of this earth…. WHERE WERE THEY??? Do they really believe this is what Jesus would want?

There are REAL Christians that care about the situation. There are groups like the Society of Friends that care and help alleviate the suffering of the Palestinian people. They are the ones that live the Message of Jesus… unlike the Evangelicals who obviously are ‘full of something else’.

Oakland CA. Gestapo May Search Homes For Guns Without Warrant

Listen to the story
OAKLAND _ A six-month pilot program where Oakland police officers would knock on doors and ask permission to search homes for guns got the green light from the City Council's public safety committee Tuesday night.

It goes to the full council Tuesday, when the council will meet at 6 p.m. at City Hall, 1 Frank Ogawa Plaza.

The consent-to-search program, as it is called, is based closely on a similar effort launched in St. Louis in 1994 and on ongoing programs in Boston and Washington, D.C. The idea is simple: To ask parents for permission to search their homes for weapons their children may be hiding.

Under the program, officers would request permission to search homes for guns. Guns would be taken away, but officers would not pursue prosecution unless the weapon was tied to a crime.

The St. Louis effort fizzled after initial success, but Oakland's Deputy Police Chief David Kozicki said that in Washington, police officers say they cannot keep up with requests from parents to search their homes. Such is the interest in the program, he said.

Councilwoman Patricia Kernighan (Grand Lake-Chinatown), who is on the public safety committee, said she was surprised to hear that and hoped Oakland might see the same results.

``I think it's worth trying and seeing what the community reaction is,'' she said. ``If it's embraced as a way to get guns off the street, great. If people don't want to cooperate, then we don't continue the program.''

Kernighan and
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Councilwoman Desley Brooks (Eastmont-Seminary) asked the Police Department to look into the possibility of a consent-to-search program in February.

The police department is proposing a six-month trial period for the program beginning in either June or July, probably somewhere in West Oakland.

Lt. Kirt Mullnix said the program, which would be launched during summer break, would largely be operated by Campus Life and School Safety (CLASS) officers, who normally patrol in and around schools.

It also could involve department problem-solving officers as well. All told, six to 10 officers would be used in the effort, Mullnix said. He didn't anticipate additional overtime being billed to the city.

Consent-to-search programs are not without controversy. Oakland civil-rights attorney John Burris criticized the idea when asked about it in February. And the American Civil Liberties Union has protested programs in other cities. Mark Schlosberg, police practices policy director for the ACLU of Northern California, said the organization would pay close attention to what happens in Oakland.

"There are a whole host of reasons why people might not want police to search their homes," he said. "But people might not know they have a right not to consent."

City and police officials stressed it would be important to educate community members about how the program works before implementing it and said providing education and outreach would be a priority.

Under the program, if guns were found, police would take them away, but not pursue prosecution unless the gun in question was tied to a shooting or homicide.

``The important thing is you're looking at removing guns from the streets to prevent future violence,'' Mullnix said. ``You're giving up arrest and prosecution for less violence in the future. It's another tool we can use. There's a lot of gun violence in Oakland and that's why we're trying it.''

Evidence is Growing: Continuity of Government Plan is Currently in Effect

"it seems to me that this administration has justified its crimes by NOT suspending the state of emergency that went up on September 11, 2001. They are using emergency powers if you look at the whole of the spying, military actions inside the US, etc. I would wager that if asked, this administration will admit that we have been in a state of emergency for their tenure in office."
Remember that Continuity of Government plans -- that is, the measures that go into effect in case of emergency -- suspend the Constitutional form of government, cut elected officials out of the loop, and may even allow the government to tell the media what it can and cannot report.

Remember also that the entire Homeland Security Committee of the U.S. Congress has been denied access to the government's Continuity of Government Plans even though it has clearance to view such plans (video; or here is the transcript). Indeed, a member of that Committee has said "Maybe the people who think there’s a conspiracy out there are right”.

If we are in a state of emergency and COG plans are in effect, then Congress acting even more obviously like corporate and military lapdogs than normal and totally ignoring the will of the people would make sense. It would make sense that "impeachment is off the table", because Congress would not even be sitting at the table under a non-constitutional COG form of government; and Congress certainly would not be a co-equal branch of government with the Executive branch.

If we are in a state of emergency and COG plans are in effect, then the corporate media's acting even more obviously like the disinformation arm of the government than usual would make sense.

Given the stakes, it is vital that we demand that Congress and the White House state on the record whether or not Continuity of Government plans are currently in effect. We're not going to make any progress on whatever issue is most important to us -- peace, liberty, election integrity/vote fraud, 9/11 truth, etc. -- if we are living under a COG regime and we don't even know it.

And our strategy will be different depending on whether we are living under a COG regime or a Constitutional form of government.

We have to find out one way or another.