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Choosing bankruptcy over bail out Pennsylvania State Capitol filing for bankruptcy protection this week.
And it's not alone several communities around the country are either facing bankruptcy.
Or already declaring.
This is many local governments and entire states are seeing -- huge budget shortfalls.
Is bankruptcy the way to go for then instead of taxpayer funded bail laps.
Hi everybody I'm Lori -- in for Cheryl Casone welcome to you -- -- it.
Our cashing -- -- this week Wayne Rogers Jonathan Tony Tracy Byrnes.
And John Layfield also joining us this -- democratic strategist and the president of Mercer associates.
Everybody -- you -- Begin with you should local governments go bankrupt instead of taxpayers bailing the maps.
Absolutely that's what the bankruptcy court and of course code is all about you file chapter nine it Fuhrman -- -- Chapter Eleven if you were a corporation the United States.
The bankruptcy law with it wasn't designed for these kind of things and allows the good the municipality of the state -- what have a body it is -- -- reorganized.
And paid -- -- to their credit does illness in a certain.
Structured way and that's the best thing to have fled cities to do because you don't -- -- otherwise you -- bail out everybody gave bailout the world and that's what we've been doing.
Indeed the John let me throw this question to you now.
Do you risk roiling financial markets if you're setting a precedent here with municipal bankruptcies.
That's the argument from the governors like governor brown in California one of the worst states in the country you know you look at Michael lewis' latest book comparing it to breeze and saying it's pretty much on par with Greece.
And it is as trying to make it harder for these municipalities go bankrupt because He believes the contagion effect will roil the markets.
But you look at Jefferson County Alabama they had 3.5 billion dollars they went into default and investors lost over a billion dollars.
The market isn't -- Obama that they don't know that the default right there are a bankruptcy really isn't money it's basically the same thing to the markets as far as the contagion effect which is already happening.
The contagion effect five states are in filing bankruptcy this year you've got 42 states -- budget shortfalls.
I -- what are your thoughts bail out bankruptcy.
I think you gotta have bailout you gotta have stimulus I mean look good going to what -- -- -- with regard to bankruptcy.
I'm sure that wooden awards when Wall Street got its -- and that's the problem main street is looking for the same.
-- standard and not a double slandered and you can't we saw with Detroit.
What how that worked with the auto industry and we now have the Detroit Lions at five and -- so I -- -- -- it can work.
And we need that stimulus package and that should be an option on the table to the City Council and -- Good thing but what he's out money is not the insert and what did the taxpayer why I don't.
Handing out money you are certainly handing out money -- that they -- embezzling you yeah I think in the middle class -- And actually made -- -- how well that stimulus money machine and are we add it -- investments -- addicted to bail out by the way I said that states it was communities five communities.
Have filed for bankruptcy this you're just want to clarify that but.
Just a bailout culture we just saw the markets soaring.
-- -- news of bank bailout in in this week in US markets just -- up I mean this is just -- troubling culture that wearing here.
-- Abu -- you're right and the problem is is because we had to wards off the books that weren't accounted for -- -- handing out.
Taxpayer money to those that really didn't need it for ten years going on twelve years and when you have that when you have taxes.
As revenue contributing only fourteenth a strategy to create and you're spending -- all wars.
Brings up when I got it right and you've got to be fair here look you got -- -- that we're not a it's not funded under Bush Administration you have now got three wars that are not funded under the Obama administration he's carrying that policy of reckless fiscal responsibility.
You're Detroit Lions -- had warned it would -- million -- though that ought to bail out candidate states getting money.
That is nothing more than the stimulus package that's not a -- They'll let us on Friday anyway is on the -- right here right got a coalition ally is definitely it was Rick Rick parry what won't -- it needs to Obama for stimulus funds.
Reports to the tune of six billion dollars in -- David talked about and -- that they know there is stimulus out there let's be real this stimulus the government spending is exactly what the bankruptcy would hopefully remove that Mal investment this situation that -- our story this morning is an example where -- city of 50000 has racked up 300 million dollars in -- investment in this case -- incinerator.
That bankruptcy would -- would -- -- bailouts you -- grayer than anyone but I also want stimulus.
-- -- nobody can understand you're talking the same time Tracy just went for you 300 billion in federal stimulus RD gone out to the states what into it yeah.
Of cities are in worse shape this year than they weren't last year alert really didn't just hand out -- -- only let's just the ride down the -- and that seems to be what we do.
They -- really hasn't worked we know that firsthand.
-- file for bankruptcy we did get on the code is re ready to do this properly let them do let them -- -- they would deal their creditors.
And everyone could move on from there I have -- -- yeah.
I -- -- not apply that to the banks please tell me why we.
I'd like the bank's data we all are against the bailout for the banks my god we talked about it in the show for years the problem with your bailout culture is that whether the banks -- European countries whether it's local municipalities.
That bailouts prolong the problem and you -- ended but that's why they -- -- like you have a problem often.
Weighing the thing Larry about -- -- they're street while the bankers are still getting their bonuses I mean come on -- At that excuse me all due respect that that didn't have anything to do -- that you're making a comparison that the banks got bailed out and they afford.
Therefore you should bail out that none of them should have been bailed out.
That's the point.
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-- whether the bankrupt if they should and we're all going through the bankruptcy process.
-- -- -- That's a very simple process look.
Over a third of the money that the states yet it's from the federal government that's what they balanced the budget the -- -- -- stolen money and say hey don't balance your budget.
Don't -- servers I don't get a job a third of that money from the -- municipalities comes from the states so in the stimulus stopped and you have to stop we got this massive deficit this statement competitor -- bonds but that's -- -- as the ones that are not gonna end up getting this money they're faced with -- -- -- our bankruptcy and it got -- left to be done what needs to be done.
-- were all looking at cost from every angle here.
-- and John -- aren't we we aren't we are laureate actually the one solution that cost the tax -- that we're all concerned about nothing.
Is privatizing the assets like the trash like the roads like the airports like the bridges that's the one solution the actual -- -- that would solve the problem benefit the country -- not cost the taxpayer dime.
I guess bottom line here -- that.
This cause it screens for the need for overall whether it's on the municipal or state or the federal level for entitlement reform and then look what what ever sit -- their medicine everywhere corporate America did it already we all did it at home state cities are no different nations you don't need to put -- -- stupid statues and build new park.
Did you books and a quarter before you do that.
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