- Ashlee Rezin/for Sun-Times Media
- Mayor Rahm Emanuel needs to play hardball with lenders.
At the risk of alienating my many banker friends, I’d like to join Mayor Rahm’s fledgling crusade against the capitalist swine whose exorbitant interest rates are like a millstone around our fair city’s neck.
OK, maybe the mayor didn’t state things quite like that.
But he seemed to be finding his inner Karl Marx when he recently sounded off against Moody’s bond raters, who are key members of the Wall Street constituency that heretofore was largely known as the mayor’s base.
In particular, the mayor was critical of a report put out by Moody’s Investors Service that dropped the city’s credit rating to junk-bond status.
Only one other city of more than 500,000 has achieved such a dubious distinction—and that would be Detroit.
Which, as everyone knows, is what the mayor’s reelection was supposed to keep us from becoming.
So you see, Chicago, you could have voted for Chuy after all.
In short, it’s as though the mayor accused Moody’s of being as arbitrary and unfair in judging the city’s financial condition as the refs were in officiating game four of the recently concluded Bulls-Cavaliers series.
That’s the game where the refs basically allowed the Cavs to saddle up Derrick Rose and ride him like a horse.
Moody’s issued its report a few days after the Illinois Supreme Court ruled against a state law intended to cut pensions.
“We believe that the city’s options for curbing growth in its own unfunded pension liabilities have narrowed considerably,” Moody’s wrote.
In short, if the city can’t free up money by sticking it to a bunch of retired geezers, it’s going to have to pay even higher interest rates down the road.
The mayor was outraged by Moody’s downgrade. He said it was an “immature” and “irresponsible” decision that doesn’t take into account all the wonderful “progress” he’s made to get Chicago’s finances in order.
The lower rating means interest rates on bonds will rise to cover up the risk of lending to potential deadbeats, like Chicago in the age of Mayor Rahm.
Hey, mayor lovers, don’t get mad at me. I’m just paraphrasing what Moody’s is saying.
The lower rating could also force taxpayers to pay hundreds of millions of dollars in penalties on those crazy swap contracts that Mayor Daley should never have negotiated in the first place.
Just to remind you of the previous fiduciary mastermind you elected as mayor, voters.
It’s pretty obvious the mayor’s going to have to sock us with higher taxes to get out of this mess.
That won’t be easy to do for a mayor who’s so stubborn he’s still insisting he balanced the last four budgets without property tax hikes.
Even though the budgets weren’t balanced and he actually did raise property taxes.
Well, Mr. Mayor, as long as your raising our taxes—again—the least you can do is try to force those various lenders to amend the egregious debt deals they made with the city and schools.
I mean, you took the first baby step by criticizing Moody’s. Let’s follow that up by playing hardball with the bankers. You can do it—just pretend they’re teachers.
For the last few months, Saqib Bhatti, the economist for the Roosevelt Institute, a liberal think tank, has been laying down a strategy in various essays and reports.
“This is the moment for the mayor to play hardball and force the banks to take significant concessions to protect the interests of the city’s communities and its bondholders alike,” Bhatti recently wrote. “He can do this by suing the banks for misrepresenting risks associated with these deals, in violation of their duty to deal fairly with municipal borrowers, and by initiating a debt strike against the swap counterparties by strategically defaulting on the swap payments.”
Here you go, Mayor Emanuel, read it yourself.
It’s only fair that everybody—not just pensioners and taxpayers—sacrifice something to get us out of this mess.