Retirees
brace for pension cuts in wake of Detroit bankruptcy ruling - (www.freep.com) U.S.
Bankruptcy Judge Steven Rhodes’ ruling that the city has the power to cut
pension benefits has many retirees wringing their hands as they ponder their
financial futures and others across the nation pondering how this ruling could
affect cities and towns elsewhere facing staggering debt. Exactly how much
pensions will be slashed is not yet known. Cuts will be hammered out in private
negotiating sessions with lawyers from the city, pension funds and retiree
groups. For months, attorneys representing Detroit’s 23,500 retirees have
argued in court that a clause in Michigan’s constitution protecting pension
benefits would insulate them from cuts. But Rhodes said the Supremacy Clause of
the U.S. Constitution trumps Michigan’s constitution in part because the state
authorized Detroit’s bankruptcy. “It’s mind-boggling. It’s disgusting. It’s
horrible,” said Mashuk Meah, 61, of Detroit, who was among the throngs of
protesters outside court Tuesday. “There will be many people hurt by this. All
I can do is pray that Kevyn Orr is fair.”
Detroit
Retirees Put on Notice in Bankruptcy Ruling - (www.bloomberg.com) Detroit, once the symbol of U.S. manufacturing muscle,
was given the authority to try to pare billions in debt and slash employee
pensions in a federal court ruling that may have implications for distressed
cities across the U.S. U.S. Bankruptcy Judge Steven Rhodes, in a decision
announced today in Detroit, ruled that the city had properly sought bankruptcy
protection on July 18, the largest ever for a municipality, rejecting arguments
by unions that pension cuts are barred by Michigan’s constitution. The decision means Detroit can
now write a plan to restructure its $18 billion of debt and trim pension
benefits under the protections of Chapter 9 of the U.S. Bankruptcy
Code.
That code limits what creditors of municipalities, including bondholders and
labor groups, can do to impede restructuring efforts. “This once proud and
prosperous city cannot pay its debts,” Rhodes said, in finding that the city
was insolvent. Detroit “has the opportunity for a fresh start.”
Argentines
Hit With 35% Foreign Credit Card Tax for Holidays - (www.bloomberg.com) Argentine
President Cristina Fernandez de Kirchner increased a tax on credit card purchases
abroad ahead of the southern hemisphere summer vacation period to stem a
hemorrhaging of reserves to a seven-year low. The government raised a levy on
card purchases in foreign currency to 35 percent from 20 percent, according to
a resolution published in today’s Official Gazette. Central bank reserves have
plunged 29 percent this year to $30.9 billion as the government uses them to
pay international debt and import energy, while Argentines have increased
spending on foreign vacations and online shopping. The tax increase raises
today’s implicit exchange rate on air tickets and purchases abroad to 8.3 pesos
to the dollar from 7.4. In the official market, the peso fell 0.19% to 6.17
pesos per dollar, while the dollar on the illegal street market traded around
9.15 pesos, according to ambito.com.
Brazil
Economy Shrinks More Than Forecast on Investment Fall - (www.bloomberg.com) Brazil’s economy shrank in the third quarter more
than analysts forecast as above-target inflation, deteriorating fiscal accounts
and rising interest rates sapped confidence and crimped investment. Swap rates
fell. Brazil’s gross domestic product fell 0.5 percent in the July to September
period from the previous three months, the biggest drop since the first quarter
of 2009, the national statistics agency said today in Rio de
Janeiro.
The drop was larger than forecast from 38 economists surveyed by Bloomberg,
whose median estimate was for a 0.3 percent drop, and follows a revised 1.8
percent gain in the second quarter. On an annualized basis, the third quarter
decline was 1.9 percent. Earlier this year, President Dilma
Rousseff’s
administration attempted to revive growth by extending tax cuts to stoke demand
for durable goods, boosted subsidized credit to businesses and auctioned
concessions for her $240 billion infrastructure program to draw private
capital. Her stimulus fueled inflation and widened the budget
deficit.
Illinois
lawmakers approve major pension overhaul - (www.chicagotribune.com) The
Illinois General Assembly today narrowly approved a major overhaul of the state
government worker pension system following hours of debate on the controversial
plan strongly opposed by employee unions. The House voted 62-53 to approve a
measure that aims to wipe out a worst-in-the-nation $100 billion pension debt
by reducing and skipping cost-of-living increases, requiring workers to retire
later and creating a 401(k) option for a limited number of employees. The
measure needed a minimum of 60 votes to pass the House. (See how House members
voted HERE.) Moments earlier, the Senate voted for the
measure 30-24. The bill needed at least 30 votes. (See how the Senate voted HERE.) The measure now goes to Democratic Gov. Pat
Quinn, who has said he'll sign it. The vote is a major victory for Quinn as he
heads into a re-election bid next year. “Today, we have won. The people of
Illinois have won. This landmark legislation is a bipartisan solution that
squarely addresses the most difficult fiscal issue Illinois has ever
confronted," Quinn said in a statement. “This bill will ensure retirement
security for those who have faithfully contributed to the pension systems, end
the squeeze on critical education and healthcare services, and support economic
growth."
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