Alternative Decisions
Week 42 of the Occupation
U.S. Bankruptcy Judge Steven Rhodes rejected the second effort by Emergency Manager Kevyn Orr to protect the banks at the expense of the people of Detroit. In a decision described as stunning, Judge Rhodes ruled that the late night deal to pay $165 million to Bank of America and UBS was “just too much money.” He also rejected the proposed $285 million loan to pay off these banks and provide $120 million for city services.
These decisions are a victory for the people of Detroit. The Judge noted that the entire swap deal behind this debt is quite likely illegal. Such a conclusion from the bench was welcome. Since the very beginning of this bankruptcy process community groups, labor organizations, some members of the city council, and concerned citizens have been saying that the debt deal was illegal, unethical, immoral, and should be challenged in court.
Calling the swap deal legally dubious, Rhodes agreed with these critics. In so doing he is offering a strong indictment of the corporate-foundation-media elite who have claimed that Detroit has no alternatives to selling off the city, destroying all common responsibilities of public life, and taking on debt for generations.
These decisions again call into question the competencies and commitments of Emergency Manager Orr and his high priced law firm, Jones Day.
Orr’s defense of not pursuing a lawsuit against the banks was equally stunning, if shallow. After admitting he had his staff draw up a possible complaint, Orr said he decided a lawsuit against the banks would have only a 50-50 chance of success and would take too long. Orr gave no rationale for either of these conclusions. Like so much of the commentary around this process, Orr simply asserts an idea as if saying something makes it true.
Since the law firm Orr hired to pursue bankruptcy is also the law firm that represents Bank of America, we should at least see some public questioning of his thinking here.
These decisions by Judge Rhodes reflect an independence of mind lacking in our public media. Judge Rhodes went against the recommendation of his own appointed mediator, Judge Rosen, in his refusal to take EM Orr’s latest proposal as the best possible deal.
Further Judge Rhodes said “The court ... will not participate in or permit the city to perpetuate the very kind of hasty and imprudent financial decision-making that led to the” original debt.
He stressed that it’s his judicial responsibility to ensure the city emerges from this process as a financially stable municipality.
Judge Rhodes is apparently taking this charge more seriously than the Emergency Manager, Judge Rosen, the corporate media, or the foundations.
In a widely self-congratulatory move, the foundation complex announced it would leap in to save the DIA and ease the blow to pensions. This offer, of course, requires the city to give up control of the DIA.
As with Belle Isle, the corporate-foundation world has long wanted to get its hands on the DIA. It thinks it has found a way.
This offer comes now that the DIA has become one of the most financially secure museums in the country. In 2012 the voter approved millage in Wayne, Oakland and Macomb counties guarantees as much as $23 million annually for the next decade.
Neither more loans nor foundation bailouts amount to the kind of structural changes required to create a financially stable city.
If the corporate-foundation world wants to help, they should pay taxes. They should insist the state pass legislation to collect income taxes, restore revenue sharing, and restore state funding to the DIA.
This second rebuke of Kevyn Orr should shake up some of those who believe against all evidence that the Emergency Manager represents the best interests of Detroit. The crisis we face, and the opportunity to develop a truly new, vibrant city require creating an atmosphere for engaged, open, and full public discussions of alternatives.