michigan town pleading for bankruptcy

NYTimes | Leaders of this city met for more than seven hours on a Saturday not long ago, searching for something to cut from a budget that has already been cut, over and over.

This time they slashed money for boarding up abandoned houses — aside from circumstances like vagrants or obvious rats, said William J. Cooper, the city manager. They shrank money for trimming trees and cutting grass on hundreds of lots that have been left to the city. And Mr. Cooper is hoping that predictions of a ferocious snow season prove false; once state road money runs out, the city has set nothing aside to plow streets.

“We can make it until March 1 — maybe,” Mr. Cooper said of Hamtramck’s ability to pay its bills. Beyond that? The political leaders of this old working-class city almost surrounded by Detroit are pleading with the state to let them declare bankruptcy, a desperate move the state is not even willing to admit as an option under the current circumstances.

“The state is concerned that if they say yes to one, if that door is opened, they’ll have 30 more cities right behind us,” Mr. Cooper said, as flurries fell outside his City Hall window. “But anything else is just a stop gap. We’re going to continue to pursue bankruptcy until the door is shut, locked, barricaded, bolted.”

Bankruptcy, increasingly common among corporations and individuals, remains rare for municipalities. Local leaders who want to win elections find it unappealing and often have other choices for solving financial woes. Besides, states have a say in whether a municipality may pursue bankruptcy at all, and they have every reason to avoid such an outcome, not least of all for fear of a creating a ripple effect that could cripple the municipal bond market and drive up the cost of borrowing.

Yet with anemic property tax revenues and forecasts of more dire financial times ahead, some experts and elected leaders fear that more localities may have to at least consider bankruptcy.

“There could be many cities in this position next year,” said Summer Hallwood Minnick, director of state affairs for the Michigan Municipal League, who added that in this state, cities had already struggled with billions less than expected in state revenue sharing. “All our communities have done is cut, cut, cut. They’re down to four-day workweeks and the elimination of parks, senior centers, all of that. So if there’s anything else that happens, they will be over the edge.”

This month, the authorities in Rhode Island said the City of Central Falls could face bankruptcy if immediate, drastic changes — perhaps the city’s annexation into a neighboring municipality — failed. Some leaders in Harrisburg, Pa., which owes millions in debt payments tied to an incinerator project, say bankruptcy may eventually be the only choice.

Prichard, Ala., which stopped paying monthly checks to retired city workers when its pension fund ran out last year, is appealing a bankruptcy judge’s ruling that it did not qualify for Chapter 9 under Alabama law.

the looming crisis in the states

NYTimes | For most of this year, the state of Illinois has lacked the money to pay its bills. Some of its employees have been evicted from their offices for nonpayment of rent, social service groups have laid off hundreds of workers while waiting for checks, pharmacies have closed for lack of Medicaid payments. Faced with $4.5 billion in overdue payments, Illinois has proposed a precarious plan to sell its delinquent bills to Wall Street investors in exchange for cash, calculating that the interest it must pay the investors will be less than the late fees it owes.

It is no way to run the nation’s fifth largest state, and it is not even clear that investors will agree, but these kinds of shaky deals are likely to become increasingly common as the states try to cope with the greatest fiscal drought since the Great Depression. Starved for revenue and accustomed to decades of overspending, many states have been overwhelmed. They are facing shortfalls of $140 billion next year. Even before the downturn, states jeopardized their futures by accumulating trillions in debt that they swept into some far-off future.

But that future is not so distant, and the crushing debt has made recovery far more difficult to achieve. As The Times reported, Illinois, California and several other states are at increasing risk of being the first states to default since the 1930s. The city of Prichard, Ala., has stopped sending out its pension checks, breaking state law and shocking its employees.

A state or city unable to make its bond payments would send harmful ripples through the financial system that could cause damage even to healthier governments. But if states act quickly to deal with their revenue losses and address their debt — and receive sufficient aid from Washington — there is still time to avoid a crisis.

The most immediate cause of the states’ problems is the decline in tax revenue caused by the downturn, just as the demand for services has increased.

Over the last two years, combined sales, personal and corporate taxes have fallen by more than 10 percent. Although revenue is likely to tick up slightly in 2011, federal stimulus money — which has been keeping many states afloat — is largely scheduled to expire. Renewing a portion of that aid would be one of the most effective ways to assist the economy.

Sharga Says Decline in Home Foreclosures Won't Continue
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WaPo | Since the meltdown in the housing market began more than three years ago, Maryland and the District have changed their foreclosure laws to give borrowers greater protection. Virginia has moved in the opposite direction.

Last year, the state legislature overwhelmingly passed a law making it easier for lenders to defend themselves when accused of giving homeowners too little warning of impending foreclosures.

The process moves so quickly in Virginia - one of the fastest states in the nation - that homeowners can receive less than two weeks' notice that their house is about to be sold on the courthouse steps.

That confronts homeowners with an almost impossible deadline. To get a court to stop the sale in that narrow window, they must gather evidence, file a lawsuit and potentially post a bond with the court that could total thousands of dollars. Instead of trying to find a lawyer and prepare a suit, many borrowers run out the clock trying to deal with their lender.

At a time when lenders have been cutting corners and using phony documents to seize huge numbers of houses, the hurdles can be insurmountable, according to lawyers, consumer advocates and borrowers who have tried to save their homes.

"There's no question that people are losing their homes when they should not be," said James W. "Jay" Speer, executive director of the Virginia Poverty Law Center, which is part of a legal-aid network.

In many states, homeowners facing foreclosure automatically get a day in court, a chance to tell a judge why they should keep their homes. The judicial process provides at least a modest check on error and abuse.

But in Virginia and 28 other states, as well as the District, according to the RealtyTrac foreclosure information service, borrowers have no such luck. They face "nonjudicial" foreclosure processes, meaning lenders can foreclose without going through the courts.

garden state foreclosure freeze?

NYTimes | Six lenders that together have filed nearly 30,000 foreclosure actions in New Jersey this year face the possible suspension of such operations next month. The possible suspension came under a court order announced on Monday by the chief justice of the state Supreme Court, Stuart J. Rabner.

The action follows a report submitted to the Supreme Court that, citing depositions and court filings in other states, paints a picture of systemic abuses in the filing of foreclosures that include so-called robo-signing, in which employees signed hundreds of documents without checking them for accuracy.

The lenders were ordered to appear on Jan. 19 to demonstrate why the state should not suspend their foreclosure actions. They are Ally Financial, formerly GMAC; BAC Home Loan Servicing, a subsidiary of Bank of America; Chase Home Finance, part of JPMorgan Chase; OneWest; Wells Fargo Financial New Jersey; and CitiResidential Living, a subsidiary of Citibank.

“It’s important that the judiciary ensures judges are not rubber-stamping documents that may not be reliable,” Judge Rabner said on a conference call.

Wells Fargo plans to fight the move, a spokesman said. Representatives for the other banks either declined to comment or could not be reached.

no foreclosure representation in cali

NYTimes | In California, where foreclosures are more abundant than in any other state, homeowners trying to win a loan modification have always had a tough time.

Now they face yet another obstacle: hiring a lawyer.

Sharon Bell, a retiree who lives in Laguna Niguel, southeast of Los Angeles, needs a modification to keep her home. She says she is scared of her bank and its plentiful resources, so much so that she cannot even open its certified letters inquiring where her mortgage payments may be. Yet the half-dozen lawyers she has called have refused to represent her.

“They said they couldn’t help,” said Ms. Bell, 63. “But I’ve got to find help, because I’m dying every day.”

Lawyers throughout California say they have no choice but to reject clients like Ms. Bell because of a new state law that sharply restricts how they can be paid. Under the measure, passed overwhelmingly by the State Legislature and backed by the state bar association, lawyers who work on loan modifications cannot receive any money until the work is complete. The bar association says that under the law, clients cannot put retainers in trust accounts.

The law, which has few parallels in other states, was devised to eliminate swindles in which modification firms made promises about what their lawyers could do, charged hefty fees and then disappeared. But foreclosure specialists say there has been an unintended consequence: the honest lawyers can no longer afford to assist Ms. Bell and all the others who feel helpless before lenders that they see as elusive, unyielding and skilled at losing paperwork.

The revelations three months ago that large banks were sloppy and negligent in preparing foreclosure documents underscore just how important it is for distressed homeowners to have representation, lawyers and consumer advocates say. Homeowners whose cases were handled improperly have little way of knowing it. Even if they found out, they would be hard-pressed to challenge a lender without a lawyer.

“Consumers just don’t know what is going on,” said Walter Hackett, a former banker who is now a lawyer for a nonprofit service in Riverside. “They get a piece of paper saying they are going to lose their homes and they freak out.”

prichard is the future

NYTimes | This struggling small city on the outskirts of Mobile was warned for years that if it did nothing, its pension fund would run out of money by 2009. Right on schedule, its fund ran dry.

Then Prichard did something that pension experts say they have never seen before: it stopped sending monthly pension checks to its 150 retired workers, breaking a state law requiring it to pay its promised retirement benefits in full.

Since then, Nettie Banks, 68, a retired Prichard police and fire dispatcher, has filed for bankruptcy. Alfred Arnold, a 66-year-old retired fire captain, has gone back to work as a shopping mall security guard to try to keep his house. Eddie Ragland, 59, a retired police captain, accepted help from colleagues, bake sales and collection jars after he was shot by a robber, leaving him badly wounded and unable to get to his new job as a police officer at the regional airport.

Far worse was the retired fire marshal who died in June. Like many of the others, he was too young to collect Social Security. “When they found him, he had no electricity and no running water in his house,” said David Anders, 58, a retired district fire chief. “He was a proud enough man that he wouldn’t accept help.”

The situation in Prichard is extremely unusual — the city has sought bankruptcy protection twice — but it proves that the unthinkable can, in fact, sometimes happen. And it stands as a warning to cities like Philadelphia and states like Illinois, whose pension funds are under great strain: if nothing changes, the money eventually does run out, and when that happens, misery and turmoil follow.

It is not just the pensioners who suffer when a pension fund runs dry. If a city tried to follow the law and pay its pensioners with money from its annual operating budget, it would probably have to adopt large tax increases, or make huge service cuts, to come up with the money.

Current city workers could find themselves paying into a pension plan that will not be there for their own retirements. In Prichard, some older workers have delayed retiring, since they cannot afford to give up their paychecks if no pension checks will follow. Fist tap Nana.

conservative echo chambers

CSMonitor | Add the coffee shop to an ever-growing list of places ghettoized by conservatives. Conservatives can attend ideologically friendly colleges like Hillsdale or Bob Jones University to avoid the influence of liberal professors. They can tune into conservative radio stations and marinate in hours of right-wing chatter. They can even consult Conservapedia, the right-wing encyclopedia site embracing "a conservative approach to education." (A taste: the first header under the entry Barack Hussein Obama reads "Obama is likely the first Muslim President.")

The proliferation of conservative-only institutions isn't new. In the 1960s and 1970s, leaders of the newly formed conservative movement perceived a need for alternatives to institutions they believed were riddled with liberal bias. To some extent, they were right. By the 1960s, the majority of Americans were liberal, supporting unions, civil rights, and government programs for the middle-class and poor. Media, universities, and government agencies tended to reflect this.

But conservatives have transformed a solid argument about liberal bias into something else entirely. They argued that institutional liberalism was not a reflection of the zeitgeist but rather a result of a liberal elite forcing everyone in its reach to march in ideological lockstep. Based on this argument, the right built an ever-growing network of conservative media, foundations, universities, and organizations – what liberal commentator Sidney Blumenthal called the counter-establishment.

The counter-establishment's foundation on the idea of an entrenched liberal elite colors the mission of today's conservative enterprises, which tend to assume anything not labeled conservative is liberal by default. Conservapedia, which proclaims itself "The Trustworthy Encyclopedia" warns that the founders "do not allow liberal bias to deceive and distort here," implying all other encyclopedias do.

Likewise, A Conservative Cafe's owner insists that coffee houses are "havens for liberal ideas and decaying social values." Yet modern coffee houses are hardly liberals-only. Starbucks, for instance, flourishes in GOP strongholds, be they in northern Virginia or the reddest reaches of Idaho. Orange County, Calif., is littered with latte peddlers.

Liberals, too, have carved out spaces for themselves – places such as the website DailyKos or The Nation magazine – but they have not created a set of replacement institutions.

Some may say that there is no real harm done by conservative self-segregation; that those who choose it are not likely to change their political stances anyway.

But shared experiences are a key component of democratic culture. Without the cross-pollination of ideas that occurs when people with opposing views come in contact, ideologies harden, extremism flourishes, and prejudices grow.

Sustaining a common political culture is tough enough when Americans share less public space and participate in fewer organizations. To limit commerce and conversation and even cups of coffee to political comrades leads us further and further from a united America. Fist tap Arnach.

mounting state debts provoke fears of crisis

NYTimes | The State of Illinois is still paying off billions in bills that it got from schools and social service providers last year. Arizona recently stopped paying for certain organ transplants for people in its Medicaid program. States are releasing prisoners early, more to cut expenses than to reward good behavior. And in Newark, the city laid off 13 percent of its police officers last week.

While next year could be even worse, there are bigger, longer-term risks, financial analysts say. Their fear is that even when the economy recovers, the shortfalls will not disappear, because many state and local governments have so much debt — several trillion dollars’ worth, with much of it off the books and largely hidden from view — that it could overwhelm them in the next few years.

“It seems to me that crying wolf is probably a good thing to do at this point,” said Felix Rohatyn, the financier who helped save New York City from bankruptcy in the 1970s.

Some of the same people who warned of the looming subprime crisis two years ago are ringing alarm bells again. Their message: Not just small towns or dying Rust Belt cities, but also large states like Illinois and California are increasingly at risk.

Municipal bankruptcies or defaults have been extremely rare — no state has defaulted since the Great Depression, and only a handful of cities have declared bankruptcy or are considering doing so.

But the finances of some state and local governments are so distressed that some analysts say they are reminded of the run-up to the subprime mortgage meltdown or of the debt crisis hitting nations in Europe.

Analysts fear that at some point — no one knows when — investors could balk at lending to the weakest states, setting off a crisis that could spread to the stronger ones, much as the turmoil in Europe has spread from country to country.

Mr. Rohatyn warned that while municipal bankruptcies were rare, they appeared increasingly possible. And the imbalances are so large in some places that the federal government will probably have to step in at some point, he said, even if that seems unlikely in the current political climate.

“I don’t like to play the scared rabbit, but I just don’t see where the end of this is,” he added.

what sorts of schools exist in banana republics?

WaPo | Highly stratified, just like the society. The very wealthy send their children to private schools of privilege, just as is becoming the norm here. The poor go to schools where they are daily reminded of their inferiority. How many ways do we have to remind our students of their academic inferiority? Could this be an unconscious or sub-rosa part of the high stakes we now attach to test scores? Is this perhaps part of the reason schools, teachers and communities are stigmatized when schools are condemned as failures and dropout factories? Our schools are inevitably mirrors of the society in which they function.

I must add here, lest I be accused of adopting a fatalistic stance, that I believe schools have a powerful role to play in cushioning the blows of poverty, of lifting the aspirations of our students beyond their circumstances.

But everywhere in school reform these days we hear of the need for "urgency," as if the reason that previous generations of educators failed to eliminate the achievement gap was a lackadaisical attitude, or persistent low expectations. Not so. Unfortunately, although schools can make a difference, poverty and a genuine lack of opportunity usually trumps our efforts.

The intense discomfort the "school reformers" have with our low-performing schools may reflect our unwillingness to recognize that yes, we have a growing underclass in the United States. Yes, we have a burgeoning strata of society that no longer can even grasp the bottom rung of the economic ladder.

We can blame the schools for this, but the schools did not create this situation, and getting everyone ready for college and careers will not fix it. Only when we get our economy back onto firm ground and restore some balance, so the wealthy are paying their fair share of taxes, and the middle class can survive and prosper, and the poor can truly access the ladder to success, only then will we see hope return to our students and see the gaps in achievement really begin to close.

florida’s SB 1070: all immigrants must carry papers, except canadians and europeans

Video - Gov. George Wallace 1963 Inauguration address.

Immigrant Rights | Well, folks, it appears we’ve come to the point where it’s not necessary to even feign non-racism any longer. You've seen the ads. Now, witness the draft of an immigration law modeled after Arizona’s SB 1070 “papers, please” law that takes the controversial tied-up-in-court-because-it’s-ridiculous law even further.

Tim Elfrink at Miami New Times (full disclosure: I work for the paper) reports that the law drafted by Florida state representative William Snyder, and supported by GOP gubernatorial candidate Rick Scott, includes a clause that "Even if an officer has 'reasonable suspicions' over a person's immigration status … a person will be ‘presumed to be legally in the United States’ if he or she provides ‘a Canadian passport’ or a passport from any 'visa waiver country.'" Elfrink points out that aside from four Asian countries, all other visa waiver countries are located in Western Europe.

What the…? Yep, that’s right. The Florida law in a nutshell: If you’re a white non-Hispanic, you’re presumed to be in the country legally and don’t need to show any proof. If you belong in the “all others” category, better carry your papers.

Of course, there’s an explanation for such blatant racism, as Snyder told a radio host: "What we're doing there is trying to be sensitive to Canadians. We have an enormous amount of ... Canadians wintering here in Florida … That language is comfort language."

Ah, yes tons of Canadians wintering here in Florida … along with MILLIONS of South Americans. In the biggest tourism destination in the state, Miami, people from South America comprise 52% of the visitors alone. That’s not even counting tourists from Central America and the Caribbean. These are people with plenty of disposable income, and plenty of tourism options. If Florida became a state suspicious of Latinos, they would just take their billions of dollars elsewhere. For a state whose economy relies so heavily on tourism, especially from Latin America, you’d think politicians would be a little bit more worried about making everyone feel comfortable. But that’s what makes it obvious this little clause isn’t about tourism at all. It’s about using every thin veil and pretense possible to try to legalize racial profiling. Fist tap Dale.

states rights

Video - Four days after Gov. George Wallace, Terry Sanford offered a different vision for North Carolina.

WaPo | Republicans' consolidation of power in state capitols is likely to expand the number of states that employ a far more limited, free-market-oriented approach to implementing the nation's new health-care law than the robust regulatory model favored by its supporters.

Although the law is a federal statute, it leaves states to administer many of its most important provisions and grants them considerable leeway.

It is up to states to run markets, known as "exchanges," through which individuals and small businesses will be able to buy health insurance plans, often with federal subsidies, beginning in 2014. States will also oversee a mostly federally funded expansion of Medicaid to cover a far larger share of the poor.

Many incoming Republican governors made their antipathy to the law a plank of their campaigns. Tennessee Gov.-elect Bill Haslam denounced it as "an intolerable expansion of federal power." Wyoming Gov.-elect Matt Mead promised to join 21 states contesting its constitutionality in federal courts. And Maine, one of the first states to set up a task force to implement the law, will now be led by Paul LePage, a tea party favorite who vowed to work against the legislation and predicted that voters would soon see headlines about him telling President Obama to "go to hell."

Such state leaders cannot block implementation of the law: If they are unwilling or deemed unready to run an exchange by 2014, the legislation empowers the federal government to step in with its own version. But the law does grant states a fair amount of discretion.

The result, analysts say, is that two models are likely to appear: Democratic governors and legislatures will probably emphasize vigorous regulation and government oversight, while Republican state leaders will probably put greater stock in privatization and other free-market approaches.

"The character of what emerges in each state will in large measure be driven by the philosophy of its governor," said Michael Leavitt, a former governor of Utah who served as secretary of health and human services under President George W. Bush and whom many conservative state leaders are now consulting.

Video - Daffy Hood meets Friar Porky.