Banksters Win Again
(Reuters) - The judge in the landmark bankruptcy of Alabama's Jefferson County sided with Wall Street creditors on Friday and sharply limited how the cash-strapped local government can use funds generated by its sewer system.
The ruling, in a months-long court dispute, aggravates a cash crunch for the county that may exhaust its general fund within three months.
In the dispute over the size of payments to owners of $3.2 billion of sewer-system debt, U.S. Bankruptcy Judge Thomas Bennett said the county cannot pay legal fees and set aside charges for depreciation and amortization from net operating revenues owed to creditors.
The judge stopped county officials from putting current monthly revenues into reserves for capital projects, professional fees and other purposes not directly related to present operations - actions which reduced payments to creditors. .................(more)
The complete piece is at: http://news.yahoo.com/judge-gives-win-wall-street-alabama-bankruptcy-231755976.html
................Lest we forget how Jefferson County ended up in this mess..........................
Jefferson County, Alabama: Screwed By Wall Street, Still Paying
POSTED: April 7, 11:47 AM ET
by Matt Taibbi
The good times just keep coming for Jefferson County, Alabama. Last year I did a story for Rolling Stone about Wall Street's sacking of the Birmingham, Alabama region -- the city was roped into a series of deadly swap deals by a number of banks, most notably JP Morgan Chase, that left the county billions of dollars in debt.
The genesis of the whole affair was a sewer project that crooked local pols turned into a $3 billion money pit; when they turned to Wall Street to help finance their way out of the cost overruns, the banks leaned on the County to take on a series of swap deals that essentially pushed the debt into the future, but at geometrically increasing cost. Among other things, the banks worked through middlemen who bribed the local commissioners into taking the toxic deals. As a result of all of this, Jefferson County not only ended up saddled with an astronomical debt service on its sewer project, it also saw a downgrade in its overall credit rating, which left it paralyzed in its attempts to borrow money to pay for general expenditures.
Those financial chickens are now coming home to roost. Some of the people I spoke with during that story have been in touch lately to give me the gruesome updates. The most recent news is that the County is closing four courthouses in an attempt to save $21 million a year. Beyond that, there has been a spate of ugly news stories. A local judge recently appointed a New Jersey Water Works executive named John Young to serve as the receiver for the JeffCo sewer system. The appointment of the receiver came at the behest of Bank of New York Mellon, the trustee for most of the county's debt -- Young's job will be to jack up sewer rates in order to pay off the $515 million of sewer debt the city defaulted on.
I got a number of outraged emails from County residents who noted that Young's salary will be $500 an hour. This unelected official will be paid $4000 a day for the job of raising sewer rates on citizens who never once voted for a new sewer project, never voted to accept any of the swap deals, and in general were deprived of any input into any of the financing messes once the few elected officials who were involved started taking bribes from the banks. ........(more)
The complete piece is at: http://www.rollingstone.com/politics/blogs/taibblog/jefferson-county-alabama-screwed-by-wall-street-still-paying-20110407#ixzz1zPtl0y7w
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Matt and Yves Smith were just on Bill Moyers talking about this case (among others) and how it went down the rabbit hole so quickly.
Excellent video: http://www.democraticunderground.com/1002847633
