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Wall Street lenders want bankrupt city to pay them before own retirees

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The city of Stockton, California declared bankruptcy a month ago and is in the process of sorting out its financial affairs. Now it has been hit with a fresh indignity in the form of a threatened lawsuit from Assured Guaranty, a company based in Bermuda which provides insurance against defaults on municipal bonds.

In 2007, Stockton borrowed $125 million in the bond market to pay for enhanced pension benefits and invested the money in its California Public Employees’ Retirement System (CalPERS) acount, where it lost about one-third of its value in the economic crash. Stockton still owes $124 million in payments on the bonds, but its bankruptcy plan calls for it to pay only $21 million.

Assured Guaranty finds it unacceptable that Stockton is giving top priority to paying its own employees’ pensions. It calls this “a contortion of the bankruptcy process” and insists that it is unacceptable for the city to “prefer one class of similarly situated creditor over another.”

The “similarly situation” part is what’s in question, though. According to the general counsel of CalPERS, under California law “the obligations owed to the public workers of the city have priority over those of general unsecured creditors.”

When the city of Vallejo declared bankruptcy in 2008, for example, and officials considered scaling back pension obligatons, pressure from CalPERS forced them to back down.

The Sacramento Bee points out, however, that pension obligations are no longer as ironclad as they once were. In California, the cities of San Diego and San Jose have approved ballot initiatives — which are being challenged in unions — to scale back the promised benefits for current employees. Other states have reduced cost-of-living increases for retirees, and when Central Falls, Rhode Island declared bankruptcy last year, police and firefighters agreed to accept at 25% cut in their pensions.

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Meanwhile, Assured Guaranty has been struggling with its own financial problems. Last December, S&P downgraded its credit rating, and in May it posted a first quarter loss on derivatives losses.

There is thus reason to believe that the lawsuit is intended quite seriously — and there is a chance that it could lead to a revision of the laws involving bankruptcy and retirement plans.

Photo by Montyofarabia (Own work) [CC0], via Wikimedia Commons

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‘We have been under siege’: Trump falsely claims he has been ‘violently’ attacked by his critics

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President Donald Trump claimed to be the victim of "violence" during his official campaign kickoff in Orlando, Florida.

"Many times I said we would drain the swamp and that’s exactly what we are doing right now. We are draining the swamp," Trump claimed, despite having the most scandal-plagued administration in American history.

"And that is why the swamp is fighting back so viciously and violently," Trump argued.

"For the last two and a half years we have been under siege and with the Mueller report we want and now they want a do-over. They want a do-over," he repeated.

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Sarah Huckabee Sanders lied ‘proudly and with impunity’ because she was raised to be ‘impervious to reason’: WH reporter

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Outgoing White House press secretary Sarah Huckabee Sanders was blasted by a White House correspondent for her brazen lying from the White House podium.

"Sarah Sanders is a true believer. Conditioned by an upbringing rooted in Christian rhetoric that's impervious to reason, she views the world through a lens in which everything exists in absolutes," Playboy magazine White House correspondent Brian Karem wrote.

Her father, Mike Huckabee, is an Evangelical pastor who served as the Republican governor of Arkansas prior to unsuccessful presidential bids.

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Nancy Pelosi says White House attempt to block Hope Hicks testimony is ‘obstruction of justice’

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President Donald Trump's White House is committing obstruction of justice by claiming Hope Hicks has "immunity" from testifying before Congress about her time in the administration and even transition.

Speaker of the House Nancy Pelosi was asked about the administration's contention by CNN congressional reporter Manu Raju.

Pelosi replied that it was, "obstruction of justice."

The answer could be important as Congressional precedence says that obstruction of justice is a high crime or misdemeanor worthy of impeachment.

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