Detroit pensioners will receive 16 cents on their expected retirement dollar:
On Friday, city financial consultant Kenneth Buckfire said he did not have to recommend to Orr that pensions for the city’s retirees be cut as a way to help Detroit navigate through debts and liabilities that total $18.5 billion. Buckfire said it was clear that the city did not have the funds to pay the unsecured pension payouts without cutting them.
“It was a function of the mathematics,” said Buckfire, who said he did not think it was necessary for him or anyone else to recommend pension cuts to Orr.
Are you saying it was so self-evident that no one had to say it?” asked Claude Montgomery, attorney for a committee of retirees that was created by Rhodes.
“Yes,” Buckfire answered. Buckfire, a Detroit native and investment banker with restructuring experience, later told the court the city plans to pay unsecured creditors, including the city’s pensioners, 16 cents on the dollar. There are about 23,500 city retirees.
The secured creditors, by which is meant the banks, received 75 cents on their dollar. In light of this, you may wish to keep in mind that as a bank depositor, you are a similarly unsecured creditor who is loaning money to institutions that no longer have to mark their assets to market. I estimate that the average bank assets are 40 percent lower than recorded, so you should understand that the amount of money you have in the bank is likely 60 percent of what you see on your statement.
At best.
The Detroit pensioners are fortunate the banks were willing to take a 25 percent haircut. If not, they would have received even less, perhaps even nothing.
This is why we are seeing the likes of Paul Krugman waxing increasingly hysterical as they call for More Inflation Now! With the Federal sector finding it increasingly difficult to prop up Z1/L1, (L1-G actually fell for the first time since Q2 2008), and the three main private sectors average 1.1 percent quarterly growth between them, the economic winds are blowing rather cold again.