Judge Rhodes, Detroit, and the impact on all of us

Judge Rhodes is a federal bankruptcy judge – appointed to that position for life – no responsibility to the people – that is the issue raised by Thomas Jefferson in his so-called “tree of liberty” letter.

Judge Rhodes is the man, the one and only man, in America who will rule on the Detroit bankruptcy which means who gets what, when and what sort of plan is set for the future.  Is that a big task?  You bet.  But isn’t that what is done in every bankruptcy situation?  You bet.  So why are you raising the question about one man ruling about everything in this situation?

Because his and our situation in this Detroit bankruptcy case affects all Americans – not just a limited place and a limited number of people – it will affect all of us for a long, long time to come.

We ask that you read, if you have not previously, this statement from the bond insurers who cut a deal with Detroit before it entered bankruptcy, loaning them funds with a security interest in future casino revenues – please go to:  http://www.mlive.com/news/detroit/index.ssf/2014/07/fight_over_detroits_casino_rev.html#incart_related_stories

The bond insurer made this loan to make money – but they went one key step further – they secured their loan with future revenues which makes them a secured creditor; not one of many unsecured creditors.  Who are those many unsecured creditors?  Past and current city of Detroit employees.  In bankruptcy, those folk get to stand in line and divvy up what is left over after the secured creditors are paid – that is the normal standard of settlement in a bankruptcy action.  But not this time.  The employees and the pensioners are getting most everything they were previously getting and the bond insurer is getting pennies – literally pennies.  Put it another way – the bankruptcy proposal turns the legal concept of secured creditor preference upside down.

So what you say – better to pay the pensioners instead of a nasty old corporation, huh?  Sure if you are a politician, particularly a democrat politician who makes your bones (blog speak for buying votes) with other people’s money.  But what about a contract?  What about future municipalities who will need a bond insurer to improve the likelihood that investors will buy their bond issues?  What about the added cost to all of us if those insurers raise their rates?  The only difference between raising our taxes and raising the cost of borrowing for municipal debt is the theory that in a republic the people get to vote – to decide – to rule.  Here the judge raises the costs to the people; the people get to say nothing.

And so it is going around our country.   In Illinois the people petition to vote on term limits.    A few judges say – nope, can’t.  In other locations taxpayers try to stop public employee unions from emptying the public treasure – judges say – nope, can’t.  Lifetime judges ruling on public fiscal and financial matters is a direct violation of the concept of a republic – the people rule.  And, in many of the cases that judges are now ruling on they sit in a state of conflict of interest – they are ruling on issues that either directly or indirectly affect their pocket book or their standing among others whose pocketbooks are being affected.

This is not the rule of law – it is that old fashioned, always present rule of men – the men in power make the rules, enforce the rules, benefit by the rules.

That is no republic folks.  And that is exactly what Jefferson feared and wrote about in his letter.