Yes, We Are Bailing Out Detroit

Yesterday the Daily Caller reported that despite denials by the White House, Washington is bailing out Detroit. The bailout of $100 million is being described as “blight remediation.”

The article reports:

…it (the $100 Million) allows the city’s new managers to reshuffle more cash into the city employees’ pension funds, which were looted by city and union officials for several decades.

The stealth bailout was exposed by the Detroit Free Press, which said the $100 million would be taken from the so-called “Hardest Hit Fund.” That fund was created by the administration in 2010 to counter the disastrous implosion of the federally-inflated real estate bubble.

Evidently the “Hardest Hit Fund” had been drained over the years by unconventional practices, including the periodic payout of funds to employees in years when the funds’ value were boosted by Wall Street investments.

Keep in mind that the stock market has been in fairly good shape over the last few years due to the influx of money from quantitative easing. That should have kept the funds viable had they been handled properly.

The article further reports:

Detroit has been under Democratic control since the departure of Louis Miriani in 1962, when the city’s residents had the nation’s highest per capita income.

The city crashed in the 1970s, amid racial acrimony and incompetent management at the city’s vital auto plants.

Many other cities and states face severe pension difficulties. They’re led by Chicago and Los Angeles, where Democratic control has boosted the pensions of government employees.

Michigan’s Republican governor, Rick Snyder, has promised to send $350 million in state funds to the city.

It matters who runs your city. Part of the problem is unfunded liabilities (large pensions promised to union government employees). In order to get our cities and states under financial control, we need to make sure that the promises we make to our municipal and state employees are paid for at the time the promises are made. The federal government can print money–states and cities cannot.

Enhanced by Zemanta

This Should Be Interesting

Yesterday the Weekly Standard Blog posted an article on President Obama’s weekly address. The President stated:

“Here in America, we know the free market is the greatest force for economic progress the world has ever known.  But we also know the free market works best for everyone when we have smart, commonsense rules in place to prevent irresponsible behavior,”

That is an amazing statement. First of all, anyone who has children understands that putting rules in place to prevent irresponsible behavior does not always work–allowing people to suffer the consequences of their irresponsible behavior eventually works–sometimes it takes a while. Unfortunately our society has padded the floor too many times and has helped people avoid the consequences of their irresponsible behavior. Controlling the free market is not the answer–allowing the free market to work properly is.

Meanwhile, speaking of irresponsible behavior–what about irresponsible  behavior that was encouraged by the government?

In June of 2012, Free Republic reported the following:

Remember the outrage over the exposure of ACORN travesties including voter fraud and offering advice on tax evasion that led to Congress overwhelmingly voting to defund the scandal plagued organization (345-71 in the House, 85-11 in the Senate)?

Less salacious, but far more economically disastrous was the “starring role” that ACORN played in precipitating the financial meltdown of 2008 initiated by the sub-prime mortgage market meltdown. According to acclaimed investigative journalist Matthew Vadum, ACORN’s “wanton disregard for the economic wellbeing of America” through the very direct involvement for decades in federal housing policy and programs at Fannie Mae and Freddie Mac, perpetually weakening underwriting standards, and ignoring or even falsifying loan documentation put ACORN squarely at the center of the collapse of the sub-prime mortgage house of cards.

Huge numbers of loans that eventually became the problem trace to ACORN originations. Vadum discovered that ACORN housing brochures openly bragged about how they undermined mortgage loan underwriting standards.

Joe McGavin used to be the director of counseling for ACORN housing in Chicago and operations manager for an ACORN offshoot, Affordable Housing Centers of America (ACHOA). After the scandal-ridden collapse of ACORN, McGavin resurfaced in 2011 as the new director of the Illinois Hardest Hit Program. The Hardest Hit Fund (HHF) is one of many programs established by the Obama Administration to “assist homeowners who have experienced an income reduction due to unemployment or substantial underemployment” during the economic recession.

Mr. President, clean your own house first.

Enhanced by Zemanta