A promise made is a debt unpaid.
~ Robert Service
Update 12/26/22: Abandoning trust and the historic bond inherent in true Capitalism is now the way of things. Jefferson County, Alabama is one more example of anything-goes Capitalism, which is a corruption of the Capitalist system and even our Constitution. It stems from a contempt for Capitalism.
The Jefferson County, Alabama, bankruptcy, first reported on November 10th, is not only symbolic of our government’s future insolvency, a government going bankrupt at the smallest government levels, it is also about the future of our Capitalist system and the chipping away at our Constitution.
The story evolves around the safest type of municipal bond, the safe debt or general-obligation bond* and it is the next best thing to Treasuries for investors. It means the issuing government will pay it on time, no matter what. If this bond of trust between government and investor is no longer the case, what happens to our system and to investments in our government?
We need these investments to help keep our government going.
Jefferson County (Ala.) stopped paying its debts, even partial payments, when it filed Chapter 9. It could mean the beginning of the end of the full faith and credit clause of the Constitution. ** Full faith and credit might not be enforceable as it seems, but it has been the practice and it is a part of our Constitution.
Never before has a Chapter 9 government agency failed to meet its general-obligation to debt holders.
Jefferson County has decided to take advantage of the court stay in paying off its debts as no other has ever done, by not even trying to pay any of its debt. Their bankruptcy stems from a terrible decision made to finance a court-ordered rebuilding of its sewer system and they are passing their mistake onto investors instead of assuming responsibility for their incompetence. Is this what America now is? We abandon allies thoughout the world and we tell investors to go to H$!! because we cannot be trusted and we cannot assume responsiblity?
About 40% of of America’s counties are in the same exact position as Jefferson. What that means for our economic security is clear – without full faith and credit, we lose an important element of capitalism and the Constitution.
This is a tone set by the Obama administration. Obama has ignored the law in the case of secured investors with the GM and Chrysler debacle by putting the unions first, despite the law. In another case, that of Solyndra, he did the opposite by putting the investors, Obama campaign donors, first, before the taxpayers. Crony Capitalism is a misnomer and it is not Capitalism, it’s corruption. You can’t change the rules of the game after the game has been played and call yourself ethical.
Now Jefferson County has decided to essentially replicate the same corruption of a relationship that requires trust and the fulfillment of a promise. Currently banks are the investors but a new debt obligation is coming up in April which will possibly include small investors. Legally, Jefferson County might be able do it, but a man’s word used to mean something.
* General-obligation debts carry lower interest rates because they are secured by the government’s ability to tax in order to pay the debt.
* * The Full Faith and Credit Clause—Article IV, Section 1, of the U.S. Constitution—provides that the various states must recognize legislative acts, public records, and judicial decisions of the other states within the United States. It states that “Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State.”
Original Story 11/10/11: Welcome to America’s future, where towns and cities are facing bankruptcies in an economy that fails to recover. Jefferson County, Alabama, is going bankrupt. This is the largest municipal bankruptcy in the history of our country.
According SF Gate,
The move yesterday by Alabama’s most-populous county came after state lawmakers failed to back a September agreement with creditors led by JPMorgan Chase & Co. that would have reduced its sewer-system debt of more than $3 billion. Governor Robert Bentley and local leaders worked unsuccessfully for two months to rally support for the deal, which fell apart anyway.
“We’ve reached that last resort,” Commissioner Joe Knight said yesterday at the meeting before the 4-1 bankruptcy vote. “We could continue and keep kicking this can down the road, but I think the people of Jefferson County have had enough.”