Demands for stopping debt payments and calls for reparations in Detroit

By Diane Bukowski | Last updated: May 24, 2013 - 8:59:04 AM

Detroit audience at rally about banks May 4.

DETROIT (FinalCall.com) - Organizers say Detroit must mobilize immediately against criminal global banks which have evicted 237,500 residents, shut down half the city’s public schools, and devastated city services and jobs, charging $600 million last year alone in debt payments.

Time is short, speakers with the Moratorium NOW! Coalition against Foreclosures, Evictions and Utility Shut-offs said. They demanded an immediate moratorium on payment of the city of Detroit and Detroit Public Schools debt to the banks, and billions in reparations to the people of the world’s largest Black-majority city outside of Africa.

Michigan Governor Rick Snyder appointed Mr. Orr March 25, under terms of Public Act 436. That act is the substitute for PA 4, soundly defeated in a referendum vote last November.

Moratorium NOW! didn’t just “pop the hood.” Their analysis at the May 4 meeting was based on 3,000 pages of the city’s debt instruments, obtained through a Freedom of Information Act request.

Detroit Emergency Manager Kevyn Orr with Michigan Governor Rick Snyder in background. Photos: Dianne Bukowski

Mr. Orr’s law firm Jones Day, acting as Detroit’s “debt re-structuring” consultant, represents the very banks speakers said are responsible for the condition of the world’s largest Black majority city outside of Africa.

“Those banks are criminals,” said Andrea Egypt, a Detroit city retiree who co-chaired the meeting. “With their predatory lending, their instruments of fraud and usury, their seizure of homes, land and assets, they conspired to destabilize our finances and destroy the lives of our residents, creating urban blight and crime. They set up the conditions for the financial collapse of the cities across the country and the world.”

Ms. Egypt said that Mr. Orr, Detroit Mayor Dave Bing, and the City Council are ignoring “the elephant in the room.”

“They are blaming everything on the unions, city workers, and legacy costs for retirees,” Ms. Egypt charged. “But they will make sure that Detroit won’t miss one payment on its debt service. Even President Barack Obama has done nothing to stop this situation. We have to do this.”

Nationally-known anti-foreclosure attorney Vanessa Fluker agreed.

“Why aren’t these banks paying us back for the homes our people lost?” she asked. “None of this will change until the people change. We must get out in the streets first, then the laws change.”

City Councilwoman JoAnn Watson said the wealth of the banks and corporations was built on the slave trade.

Detroit City Councilwoman JoAnn Watson.

“This is much bigger than Detroit,” Ms. Watson said. “This goes all the way back to the way this country was built, off the unpaid labor of our ancestors. The profits from the slave trade paid for the War of 1812 and the Louisiana Purchase. They built Wall Street, the insurance companies and the banks. We must demand reparations.”

Abiyomi Azikiwe of Moratorium NOW! said, “Across the country, Jefferson County Alabama, the home of the civil rights movement, Providence, Rhode Island, Harrisburg Pennsylvania, Stockton, California—all of our cities are being held hostage by the banks. The municipal bond market is a $3.7 billion industry.”

Activist Azikiwe said the crisis is global, leading to huge uprisings and general strikes by the people in Greece, Spain, Italy, France, Ireland and elsewhere in Europe.

Using a colorful slide show presentation, Mike Shane said Detroit’s foreclosure crisis was the foundation of the current disaster. The banks targeted Black and Latino communities for sub-prime loans, which are eight times more profitable than conventional loans.

Banks used “massive fraud and deception in underwriting these loans,” Mr. Shane said.

Detroit, which had the nation’s lowest foreclosure rate in 1996, had 67,000 foreclosures between 2005 and 2009 alone. It has now lost 237,500 people, nearly twice as many as New Orleans lost after Katrina. In 2012, Mr. Shane said, the banks owed almost half of Wayne County’s unpaid property taxes, $57 million, on homes they had essentially stolen. The city of Detroit is in Wayne County.

Attorney Vanessa Fluker and city retiree Andrea Egypt at Detroit rally against banks.

Mr. Shane said the Senate Permanent Committee on Investigations, which Attorney Fluker testified in front of, found that Wall Street banks engaged in a criminal conspiracy.

“Our investigation found a financial snake pit rife with greed, conflicts of interest, and wrongdoing,” the report said. Banks cited in the report included Bank of America, JP Morgan Chase, Deutsche Bank, Wells Fargo, NY Mellon, Citibank, and UBS, all of them clients of Jones Day.

UBS in particular played a catastrophic role in Detroit’s economic decline. In 2005, representatives of Wall Street ratings agencies Standard and Poor’s and Fitch came to the City Council table in collusion with UBS to push a $1.5 BILLION “pension obligation certificate” (POC) debt on the city, said critics. Despite loud protests from the pension boards, the unions, and the community that the variable rate loan was fraught with risk, the council eventually caved and voted for the deal.

Mr. Shane said Detroit was only the second city to agree to such a proposal, but that many cities followed course afterwards.

After the great 2008 economic collapse, Detroit defaulted on the UBS debt several times. To stave off immediate bankruptcy, the city government agreed to turn over all of the city’s casino income taxes and state revenue-sharing funds to a bank trustee, so that the banks would get paid first, with scraps going back to the city.

Mr. Shane said that additional losses resulting from interest rate swaps on the pension obligation certificate debt totaled over $474 million, as detailed in an article in Bloomberg Businessweek, titled “Only Wall Street wins in Detroit crisis.”

He said the Detroit Water and Sewerage Department, an enterprise agency whose bonds are backed by revenue, lost over $546 million terminating interest-rate swap agreements.

The International Swaps and Derivatives Association (ISDA), a trade organization of market participants, sets the standards for default and termination events. They result in an interest rate increase of nine percent over the going “London Inter-bank Offered Rate” (LIBOR).

He said the banks dictated the appointment of Detroit EM Kevyn Orr to ensure their payment first, before meeting the needs of the people.

The current EM act, Public Act 436, decrees that the chief duty of the EM is to ensure “The payment in full of the scheduled debt service requirements on all bonds, note and municipal securities of the local government, contract obligations in anticipation of which bonds, notes and municipal securities are issued, and all other uncontested legal obligations.”

Detroit Public Schools have been under various forms of state receivership since 1999, with emergency managers taking out hundreds of millions in loans.

Detroit Public Schools Emergency Manager Roy Roberts just left his job, Mr. Shane said, because his mission was accomplished. DPS debt records show that it paid down its obligations to the banks by 2012-13 after closing half the district’s schools and laying off tens of thousands of workers. In 2011-12, DPS paid $523.8 million on its debt, or 89 percent of total per-pupil state aid. In the current year, that amount has declined to $63.8 million, or 16 percent of state school aid.

Mr. Shane concluded by calling for prosecution of the banks, a moratorium on debt payments, and “tens of billions of dollars” in reparations or restitution from the banks.

While Kevyn Orr’s chief duty is to “re-structure the debt,” said attorney Jerome Goldberg at the end of the meeting, it is highly unlikely he will take a tough stance with the same banks his law firm, which is the city’s re-structuring consultant, represents. Instead, he said, Hurricane Wall Street will be further visited on the people of Detroit and cities across the U.S.

Other speakers included Rev. Bill Wylie-Kellerman of St. Peter’s Episcopal Church, Helen Moore of Keep the Vote No Takeover; Elena Herrada, DPS school board member, Aliya Moore, chair of the Oakman School parent group, the Rev. Charles Williams, chair of the Michigan chapter of the National Action Network, and poets and performance artists B. Thomas and At Peace from the Conscious Coalition Collection.

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