Vulture capitalism at it’s worst…
No, unions didn’t kill the Motor City. “In one sense the banks caused it,” ex-banker Wallace Turbeville explains
The same day that Illinois’ Legislature approved a $160 billion “restructuring” of public workers’ pensions, a federal judge ruled that pension protections in Michigan’s state constitution could be overridden as part of Detroit’s historic bankruptcy. Along with fury from unions, that double blow inspired a new round of “I-told-you-so’s” from pundits — like “Morning Joe’s” Joe Scarborough — who frame Detroit as a morality play about politicians who lack the backbone to force cuts on public employees.
To consider what really ails Detroit, Salon called up former Goldman Sachs investment banker Wallace Turbeville, whose recent report for the progressive think tank Demos suggests the pundits have got it all wrong. A condensed version of our conversation follows.
After this decision came out, Joe Scarborough said to his panel on MSNBC, “The problem came from, you know, unions that, you know, push politicians to overpromise benefits that they couldn’t pay for in exchange for votes and money.” What do you make of that kind of analysis?
Well, it’s just based on preconceived notions and not careful analysis of the circumstances. That isn’t what has transpired over the last five years. Because the data don’t reflect that.
And what do they show?
The data show that the current level of salaries paid out by the city, and benefits that are to be paid out are very moderate … The city over the last five years has tremendously cut its operating expenses, close to 40 percent – which is mostly salaries — and is now operating at levels of employee per capita that are imprudent. And the benefits, if you look into them carefully, are quite modest …
The time scales that we’re operating in now suggest strongly that this is largely an issue of a devastated tax base and a reduction in state revenue-sharing, exacerbated by some really potentially concerning cash requirements associated with derivatives deals and overly complex and imprudent financial transactions.
Who’s to blame for the devastated tax basis?
- Joe Scarborough seeks to put conservatives back on ‘The Right Path’ with latest book (redalertpolitics.com)
- How Wall Street – not pensioners – wrecked Detroit (salon.com)
- How Wall Street Bled Detroit Dry (rinf.com)
- Detroit bankruptcy forges ahead — who will foot the bill? (nbcnews.com)
- Pension cuts aren’t just for Detroit (msnbc.com)