Ideally in a just society we talk about equity and fairness.
Those can be rather lofty ideals, but in practice, rather deceitful. I say that in the context of Detroit’s bankruptcy.
After U.S. Bankruptcy Judge Steven Rhodes declared Tuesday that Detroit was eligible for Chapter 9, Emergency Manager Kevyn Orr talked to the press about the pending issues, including the touchy subject of pensions.
“What I can say, and it’s something that the judge mentioned in his decision today,” Orr said, sounding a bit uncomfortable. “We have to be fair and equitable in our treatment with all creditor classes, whether they’re financial creditors or whether they’re retirees and the like and that’s what we’re going to try and do.”
Yes, the city is broke. Yes, there may be some painful cuts.
But to say that we should treat pensioners and financial institutions the same, and that they should take the same hit, is preposterous. I'm told by a fellow journalist who has closely followed the bankruptcy proceedings, and by a bankruptcy attorney friend of mine, that the laws say that creditors have to be treated equally. But another legal expert tells me there's likely some wiggle room as to what equal and fair mean.
Vastly Different Impact
What it should come down to is this: Whose lives will be most impacted by severe cuts?
Will those who run the financial institution have to turn to food stamps and forgo getting medications and medical procedures if the financial institutions take a bigger hit?
The answer is an obvious no. It doesn’t mean we should see these financial institutions as evil empires. No. They’re businesses that were trying to make money.
In the end, the institutions’ losses will be write-offs. Sure, that may mean a lower dividend for shareholders or a smaller return for investors. But for individuals, it won’t mean they’ll have to file bankruptcy or turn to government assistance or go without some essentials.
To put financial institutions in the same league as pensioners who put in 10, 20, 30 or more years of sweat equity into the city is disingenuous. It also ignores the human component that should be factored in when we deal with bankruptcy law.
Don't Cause Individual Bankruptcies
Orr has indicated that pensions must be cut. That should be an act of last resort. Sure, Orr points to the fact that federal law trumps state law when it comes to pensions. State law protects pensions. The federal law can override that law. But the federal bankruptcy law talks about equity, and that's what it should come down to: Not equity that involves equal percentages of money, but rather equity that addresses impact, as well.
Orr talked Tuesday about revitalizing the city and making it solvent. Who doesn’t want that?
But to create an underclass of respectable, working-class people, who will be forced to file their own bankruptcy petitions, is hardly fair and equitable.
And it’s certainly not the legacy Orr and Gov. Rick Snyder want to leave.
