Friday, April 26, 2013
NO SURRENDER TO THE BANKS-BACKED COUP FOR CITYWIDE FORECLOSURE!
Socialist Party USA Metro Detroit Local Statement on the “Emergency Manager” Takeover of Detroit
The Socialist Party of Metro Detroit expresses its staunchest opposition to the state-imposed suspension of elected governance of the city of Detroit, and likewise reaffirms its demand for the immediate restoration of elective home rule to each of the numerous other cities and school districts within and beyond Metro Detroit now operating under the unilaterally-held control of state-installed “Emergency Manager” fiefdoms.
The original predecessor to Michigan’s Emergency Manager law, 1988 Public Act 101, was enacted under then-serving Democratic Governor Jim Blanchard to allow for the state takeover of financial control over the independent, Detroit-circumscribed city of Hamtramck. With the continued unanimously bipartisan support of both Blanchard and the Democratic Party-dominated Legislature, Public Act 101 was then later replaced and extended through the enactment of 1990 Public Act 72, so as to be made exercisable against any unit of local government. Subsequently, Public Act 72 was applied to appoint an “Emergency Financial Manager” over the finances of three local governments by Michigan’s following Governor, Republican John Engler, and the finances of six local governments by the State’s next subsequently following Governor, Democrat Jennifer Granholm.
In March 2011, the former Public Act 72 law was expanded and replaced by 2011 Public Act 4, which bestowed Emergency Managers with not only financial control over the local jurisdictions where appointed, but also with unfettered political control over local governance as applied to municipalities, and academic control as applied to local school districts. Along with the supreme and unilateral assumption of all powers held by locally elected officials, as well as the continued Act 72-granted powers to sell, privatize, and transfer local public assets and services, such new authority vested in unelected Emergency Managers by Public Act 4 further included the power to void union contracts, entirely suspend collective bargaining, and even to disincorporate or dissolve the local municipality or educational district where installed.
Following a successful organized labor-led effort to place a statewide referendum on Public Act 4 on the 2012 November ballot, Michigan voters resoundingly voted to repeal the Act in its entirety. Within the same spirit of contempt for democracy at the foundation of the Emergency Manager law itself, however, Michigan’s current Governor Rick Snyder and Attorney General Bill Schuette immediately responded by declaring the legally groundless conclusion that the referendary repeal of Public Act 4 had served to automatically reenact the repealed and replaced older provisions of Public Act 72.
Swiftly thereafter on December 26, 2012, Snyder signed into law 2012 Public Act 436 (effective as of March 28, 2013) – serving to reenact all of the same substantively expanded Emergency Manager powers as had been granted under the freshly voter-repealed Public Act 4 law, while this time also including a legislative funding appropriation within the law’s provisions, so as to legally preclude its similar subjection to referendary repeal by Michigan voters.
In attempting to provide some pretense of meaningful difference between the new Public Act 436 and voter-rejected Public Act 4, the new law provides for a local government deemed to be confronting a “financial emergency” to make a one-time-only “choice” of proceeding with either: (1) total surrender to Emergency Manager control; (2) a similarly draconian “consent” agreement with the State Treasurer (for which the latter is the sole determiner of breach); (3) Chapter 9 bankruptcy proceedings (if given approval by the Governor); or (4) a process of pre-bankruptcy financial mediation between the local government and State. At the same time, however, the new law provides that any local government placed under an Emergency Financial Manager under the former (and purportedly resurrected) 1990-enacted law will automatically be subject to Emergency Manager control under the new law as well; in accordance with all of the despotically enhanced powers that the new law confers upon that position.
Consequently, for the city of Detroit, along with those of Allen Park, Benton Harbor, Ecorse, Flint, and Pontiac, as well as the school districts of Detroit, Highland Park, and Muskegon Heights, such an available “choice” now supposedly granted by the new law is squarely and entirely denied. Such exclusion of Detroit from any such “choice” comes even in spite of the city’s own drastic austerity measures over the past year, including having already laid off approximately 2,000 city employees, imposing a uniform 10% pay cut on all remaining city employees (on top of earlier major pay cuts already conducted during the year prior), privatizing three city departments, and closing fifteen city fire stations (notwithstanding the city’s far unrivaled status the nation’s arson capital).
Even when excluding the school-district-affected cities of Highland Park and Muskegon Heights, the six Michigan cities currently under Emergency Manager-rule represent approximately half the State of Michigan’s African American population. Moreover, as additionally applied to the population demographics of Inkster and River Rouge, now under binding (‘E.M.-lite’) “consent” agreements with the State Treasurer, Michigan’s current Emergency Manager law has already led to the apartheid-level result of disenfranchising a majority of black state residents from electing the governing leaders of their communities – from the very first day of the law taking legal effect.
To the extent that state officials attest the restoration of local fiscal health and solvency to be the principal goal of the state’s autocratic-trustee structure of receivership now in place; any lens of analysis given to the track record of past-appointed Emergency (Financial) Managers within the state can only lead to the conclusion that such a structure has been a colossal failure. Indeed, every chartered city and local school district which has ever been subject to one of the state’s emergency financial management acts is either once again under, or rapidly nearing, State Treasury Department designation of being in a state of “financial emergency” today.
In a number of cases, such state appointed managers have only severely worsened the scale of debt and financial losses of the local jurisdiction where appointed, particularly through their own lavish spending and high-interest borrowing on the appointed jurisdiction’s behalf, including secret self-payments and embezzlement. Even the current law’s text betrays little held concern with the substantive qualifications of one seeking an Emergency Manager post; providing that merely having five years of knowledgeable experience in either ‘financial or business matters’ amounts to a sufficient level of qualification for unilaterally displacing an entire city’s elected officials.
Of predictably far greater concern within the law than the personal qualifications of an Emergency Manager is whose interests such an appointed ruler serves. Accordingly, along with the tearing up of collective bargaining agreements, the current law most stringently mandates that each Emergency Manager ensure “the payment in full of the scheduled debt service requirements on all bonds, notes, and municipal securities of the local government, contract obligations in anticipation of which bonds, notes, and municipal securities are issued, and all other uncontested legal obligations.”
Consequently, in contrast to the prospect of bankruptcy proceedings, in which the big banks would have to share in financial losses, the State’s current Emergency Manager law is expressly designed to ensure that the banks and billionaire bond holders obtain every dollar and penny of interest that they can purport to be owed by the city. Currently the city of Detroit’s debt service stands at over $600 million per year – with $4.9 billion of the city’s long term debt owed purely for bank interest profit. Meanwhile, 80 cents of every dollar of state aid to the Detroit Public School district now goes directly to servicing the district’s bank debt.
On a far greater scale than any other culprit in recent years, however, the very same big banks behind the scenes in enacting the state’s Emergency Manager law bear the greatest share of responsibility for the crisis now confronting the city. Due, in substantially large part, to the overwhelmingly widespread practice of directly-racially targeted predatory lending throughout the city of Detroit during the years immediately preceding the housing market crash of 2008, Detroit has been among the nation’s hardest hit cities by the foreclosure epidemic, with resultantly drastic losses to the city’s collectable property tax revenue. Correspondingly, Detroit has lost over 25% of its entire population between the U.S. Census of 2000 and 2010; now presently resulting in an estimated 33,000 vacant residential homes within its city limits.
In addition to sinking down the average Detroit home price to $7,500, the banks themselves have also become the city’s largest source of unpaid property taxes. Through the practice of bank foreclosure “walkaways,” banks have continuously operated throughout the city to withdraw from final completion of the foreclosure process, following the removal of a given foreclosed home’s occupants, whenever determining that such abandonment would ultimately be less costly. In doing so, the banks then legally discard all property tax liability for such homes, without ever even informing either the city or ejected preceding homeowner of such a divestment.
Not only have such predatory lending practices targeted Detroit homeowners, moreover, but also the city itself. Throughout the decade preceding the 2008 crash, major banks convinced Detroit leaders to heavily invest in “interest rate swaps” through which the city entered into agreements to swap its own variable rate interest payments on issued bonds with the banks’ available fixed rates, such that it then made bond payments at the fixed interest rate and the banks used variable rates (most often tied to the British Libor rate) for payments made to the city.
With the tremendous drop in bank interest rates following the 2008 financial collapse, combined with widespread bank manipulation of the Libor rate to keep interest rates low, such predatory agreements have ultimately led to the city paying its bondholders at rates upwards of 6%, while receiving payments back from the banks at rates below even 1%. Consequently, such toxic swaps have amounted to enormous profits for the banks and hundreds of millions in losses to the city. Such losses have also led to a vicious cycle whereby additional city bonds musts be issued to service those presently held, while further corresponding downgrades to the city’s credit rating result in increasingly higher bond interest rates.
From a broader frame of assessment the current bank-induced fiscal crisis and corresponding takeover of Detroit are an example of what contemporary Marxist author David Harvey has termed “accumulation by dispossession,” in which the ruling establishment employs coercive means to release a set of assets (including labor) at low or zero cost. Particularly is such a process characteristically undertaken by means of both privatization-based schemes and the concerted management and manipulation of financial crises.
At the same time, such an unprecedented form of takeover quite starkly illustrates the lack of any principled or fundamental commitment to even the most superficial structures of democracy by the ruling political establishment. Through its enactment, application, and media praise of the Emergency Manager law, Michigan’s ruling class has now begun to openly acknowledge and affirm the central position that nominally democratic relations and processes are not only subordinate to banking and Wall Street interests, but also fully revocable when determined to be less efficiently conducive to the state’s service of such interests.
Although given the trappings of a divided partisan issue during this present gubernatorial term, both the enactment and most widespread application of the current law's longstanding predecessor were respectively conducted by the State's last two Democratic Party governors. Correspondingly, the very principal architect and current chief administrator of the present Emergency Manager law was, as recently as January 1, 2011, serving as the Democratic Speaker of the Michigan State House. Likewise, even Detroit’s newly appointed Emergency Manager, Kevyn Orr, has repeatedly noted the fact that he is a lifelong and active Democrat.
As with other widely publicized reactionary measures that happen to arise amid their own party’s absence from majority control, the window dressing of Democratic Party legislative opposition to the current Emergency Manger law was well in line with the Democrats’ standard role and script of posturing as the voice of public opposition, only to quickly shift into the pronouncer of its conclusion and obsolescence. Indeed, in the same manner of a rosily worded concession speech given amid an election night defeat, Democratic politicians and their public mouthpieces have already largely shifted their public sentiments into line with the current mantra that ‘it is now the time for us all to work in partnership with Orr toward fixing the city of Detroit.’
Directly prior to his selection to rule the North American continent’s now largest outright political dictatorship, Orr worked for the Cleveland-based global corporate law firm Jones Day, representing approximately half of the current Fortune 500 companies, including Bank of America, UBS AG, Citigroup, JP Morgan Chase, Goldman Sachs, and Detroit’s number one record-holder for most conducted home foreclosures within the city – Wells Fargo. During his time with Jones Day, Orr’s crowning achievement was his work on behalf of Chrysler and under the Obama administration during the auto-industry bailout of 2009, in which Orr was a central figure in pushing through the halving of wages for new hires, elimination of the eight hour day, and closing of approximately one quarter of the company’s dealerships, resulting in the loss of tens of thousands of jobs, while concurrently awarding massive pay bonuses to Chrysler’s top executives.
Already within only the second week of his state-given control, Orr has officially hired none other than Jones Day to assume the role of Detroit’s “re-structuring counsel.” Accordingly, the very same financial institutions and Wall Street bondholders already ravaging and drowning the city in debt will now have their own corporate legal counsel overseeing the city’s state-sanctioned raid on the city’s assets and finances. Moreover, should the ultimate decision later be made to have the city file for Chapter 9 bankruptcy, the terms of the current law further provide that Orr will act as the city’s sole representative in such proceedings, ostensibly in further cooperation with Jones Day in its brazenly interest-conflicted role as legal counsel.
Although recent debates over the sources of Detroit’s fiscal crisis have almost uniformly focused large attention on the State of Michigan’s breach and failure to provide $224 million owed to the city of Detroit under a 1997 agreement to provide such additional revenue in exchange for the city’s reduction of local income tax rates, such a central focus only detracts from the State’s more fundamentally egregious failure of obligation. As the principal collector of non-federal tax revenue within the state, the state government’s fundamental duty to provide essential service-sustaining revenues to its cities stems not from the negotiated terms of any past contractual agreement, but rather the basic nature of its relation.
Even more markedly does such a basic duty of state investment and adequate revenue sharing apply to the state’s largest city and historic and cultural capital, containing nearly four times more Michigan residents than any other city of the state, and six and a half times more total land than Manhattan. Yet, while continuing to expand Michigan’s skyrocketing prison and corporate-welfare budgets, the state has reduced annual levels of revenue sharing to Detroit to approximately half that annually provided a decade prior.
The Socialist Party of Metro Detroit calls upon all Detroit residents, city workers, and students, as well as those of all other Metro Detroit cities and school districts presently under Emergency Manager rule, to give no recognition to the authority of such usurping dictators in any context of relation. Accordingly, we further call, and affirm our support, for popularly and democratically coordinated direct action and civil disobedience against the loss of elective home rule, so as to make Detroit and other similarly taken-over cities ungovernable.
The Socialist Party additionally calls for and demands the declaration of an immediate moratorium on home foreclosures and evictions, both at the state-level and in each of the Metro Detroit tri-counties, as well as an immediate moratorium on the city of Detroit’s continued debt service to the banks. Furthermore, we call for and demand a massive expansion of state revenue sharing, as well as compulsory reparations from the major Wall Street banks to Detroit and other financially victimized cities.
Additionally, we call for and demand a massive state and federal public works program to rebuild our cities and communities, with funding diverted from the military, prison, and corporate welfare budgets; the cessation of the city of Detroit’s own $100 million+ payout in municipal subsidies and tax breaks to corporations each year; a 100% capital flight tax on large corporations moving jobs out of the city or the state; the combined generation of both jobs and local public service revenue through the reopening of closed factories and plants under municipal ownership and worker control; and continuously unrelenting struggle toward the goal of democratic ownership and control of all existing banks and major industries.
The current stage of overall systemic decline giving symptomatic rise to Michigan’s Emergency Manager scheme is one in which the commanding supremacy of financial capital has become so simultaneously solidified and avaricious as to spurn even the basic nominal relations of domestic bourgeois political democracy in its pursuit of targeted profits. All the more so does it consequently follow that the fight for political democracy cannot be separated from the struggle for economic democracy as well.