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Restructuring Detroit

White Supremacist and Corporate Economic Violence

by TOM STEPHENS

“Now look, I’m a trial attorney. I can cut somebody’s throat and leave them to bleed out in the gutter with the best of them. But I didn’t want to do that. That’s not my role in this job. My role in this job is sort of the zen of emergency management.”

–      Detroit Emergency Manager Fascist and Jones Day Law Firm Bankruptcy Partner Kevyn Orr[i] (June 10, 2013)

“Can I shoot someone in a hoodie?”

-       Detroit Chief Financial Officer Jim Bonsall[ii] (Fall 2013)

They couldn’t really make it much clearer, could they?  Out of their own mouths, Detroit’s Jones Day-confirmed ‘best and brightest’ corporate autocrats are telling us exactly what’s involved in their crony capitalist ‘restructuring’ of our city.  It’s systematic, structural economic violence on a massive scale.[iii]

In bankruptcy, Jones Day, Kevyn Orr and Governor Snyder intend to slash government spending, balance the municipal budget, and negotiate credit extensions with Jones Day’s Wall Street clients (on favorable terms to them).  They will leave behind a community wracked by poverty, racism, crime, and looted infrastructure, with an eviscerated social capital and political leadership as a direct result of the state’s brutal, anti-democratic takeover – “to bleed out in the gutter.” (Unless we want our city to die) We have to fight them!

The place to start is the US Federal Court House in Detroit at 231 West Lafayette Boulevard at 8:30 am on Wednesday, October 23.  This will be the beginning of the trial on eligibility for bankruptcy – the proceeding in which Jones Day seeks to take away all Detroit’s most valuable assets and give them to the highest corporate bidders among their A-list corporate clientele.  Be there!

It’s the Water

One critical example of the structural economic violence driving Detroit’s corporate Jones Day-implemented ‘restructuring’ is Wall Street’s treatment of the city’s huge water and sewerage department.  If you look at a map of the Great Lakes region and locate Detroit, you can immediately see why such an agency, responsible for providing potable water for more than 3 million People, and treating millions of gallons per day of contaminated waste water, in the heart of the greatest concentration of fresh water resources on the planet, is a major public health, environmental protection and economic development asset of primary importance.  So much so that Michigan state officials have literally been trying to take it over for more than 140 years.[iv]  And it is about to become a front-burner political hot potato in the Detroit bankruptcy case.

Wall Street’s recent treatment of the Detroit Water & Sewerage Department (DWSD) is an instructive example of what’s really going on in Detroit’s ‘restructuring,’ especially in terms of the incredibly powerful political economic forces and issues behind the legalisms.  At the very beginning of April 2013, immediately after the official appointment of Kevyn Orr as Detroit’s Emergency Manager, the Fitch credit rating organization formally downgraded DWSD’s credit.[v]

This is not a complicated act.  It’s the municipal debt-financed equivalent of a mafia loan shark knee-capping a gambler who can’t pay the vig.  Fitch’s stated reason for this specific bit of economic violence was that (after appointment of an EM to rule unilaterally over all of Detroit’s assets), DWSD was now insufficiently separated from the investment risk of Detroit and its messy fiscal crisis: “the department is a component unit of the city and therefore is not entirely free from potential city influence.

To understand the real, systematic economic brutality involved you simply have to read to the end of the Fitch press release, where they assess the relative ability to pay for the crucial, life-giving human right of access to water, as between virtually all-Black-and-Brown working class Detroit and its mostly-White upper middle class suburbs.  Fitch says that:

“Retail city rates remain among the lowest of most major U.S. metropolitan areas despite recent rate increases but are around Fitch’s median household income (MHI) affordability benchmark given the weak MHI within the city. On the suburban side, rates remain very affordable even with the estimated retail tack-on added by those wholesale entities in excess of the cost of service charged by the department; reportedly, department charges represent around 50% of the average suburban bill.”

What this means in plain English is that the low income People of Color in Detroit can barely afford what they are paying for DWSD’s critical services, considering standard measures of “affordability” based on per capita income.  White suburbanites on the other hand are paying significantly less than they can afford, and moreover about half their payments on average go to their own communities who are wholesale customers of DWSD!

Now we can begin to see the “structural” component of the economic violence at work here.  If they were allowed to run their own water system in an economically sound manner, the first thing DWSD’s Board of Water Commissioners would do is raise suburban wholesale rates, and the second thing would probably be to negotiate a slightly larger share of the rates paid by individuals in those suburban communities going directly to support the whole crucial system, rather than serving as a profit center for suburban governments.  A simple matter of equity, efficiency and sustainable support for an absolutely crucial public utility whose benefits are shared by millions across the region.  Wealthy residents of the Grosse Pointes and Bloomfield Hills, like the rest of us, appreciate the privilege of being able to flush their toilets, and will pay for it.

Now close the loop by referring back to the rationale for the Fitch credit downgrade; insufficient separation of DWSD from Detroit’s local control is Fitch’s given reason.  The one thing that Detroit as the owner of this critical system will not be allowed to do – on pain of economic death, if Fitch’s knee-capping doesn’t do the trick – is to exercise control over this system in such an equitable and sustainable fashion.  Ironically, the recent theft-by-regionalization of DWSD – the city’s most prized asset – was largely engineered under the pretext of former Detroit Mayor Kwame Kilpatrick’s criminal “enterprise” conviction dating back to before 2008.  Neither he nor any of his associates has had anything to do with Detroit’s water since then.  Meanwhile the Jones Day syndicate operation currently governing Detroit makes what the disgraced and imprisoned Kilpatrick was doing look like schoolyard bullies stealing kids’ milk money!

Jones Day Makes Their Move

The above key example of structural corporate economic violence, Motown-style, sets the stage for understanding the latest dramatic, game-changing developments in the morally bankrupt ‘restructuring’ of Detroit.  Because on Friday, October 11, 2013 – the usual time of the week chosen by corporate whores and loan sharks for sun lighting the dirtiest and most controversial of their shameful, corrupt and violent dirty deals[vi] – Orr released his Emergency Manager Order No. 17 for “APPROVAL OF POSTPETITION FINANCING,”[vii] a $350 million bombshell in which Jones Day finally made its public move from posing as Detroit’s savior and revealed their true, predatory nature.

Emergency Manager Order No. 17 is a dense 18 pages of state-of-the-art municipal finance legalese.  It boils down to a few huge transactions.  Simplified somewhat for purposes of explanation, it works like this: (If the bankruptcy court approves) 1) The big  British finance bank Barclays will loan Detroit $350 million; 2) Detroit will immediately pay the even bigger (Jones Day client) Bank of America/Merrill Lynch and the other Wall Street ‘counterparties’ on interest rate ‘swaps’ $250 million; and

3) Barclays will then move to the head of the bankruptcy line, with a “senior secured superpriority Chapter 9 debtor financing” … “Quality of Life Note” (LOL!!!) secured by a first-priority lien on every asset Detroit (i.e., Jones Day) sells that is worth more than $10 million.  In other words, the Detroit Water & Sewerage Department, as well as anything else they can get their hands on.

In essence then, Jones Day is putting the whole city in hock to Barclays so they can pay off Bank of America and its bankster cohorts.  To expand on the previous mafia analogy, the Corleone Family is paying the Barzini Family to snuff out the Rosati Brothers and the Kilpatrick Enterprise, in the process of taking control of the entire waterfront, labor, numbers, prostitution, narcotics and other political rackets in town.  Oh, and that $100 million left over after Jones Day pays the banksters?  Most reliable bankruptcy experts estimate that the costs of litigating the Chapter 9 will approximate – wait for it – $100 million.  Jones Day has apparently just floated the most corrupt, shameless, self-serving, hustle of an IPO for their own insider-traded Detroit Turnaround operation dreamed up, since Michael Milken and Ivan Boesky went to prison for manipulating capital markets via similar financial-strong man scams.

Order No. 17 is a municipal debt economic weapon of mass destruction, and 10/23/13 may be the only opportunity we will ever have to prevent its use on Detroit!  There are now 350 million new reasons to show up on 10/23!  If the previously proposed $250 million bail-in ‘swaps’ deal with Bank of America/Merrill Lynch and UBS was “a big wet sloppy kiss” to Wall Street, [viii] then we could say that this latest $350 million illicit Wall Street tryst means that Jones Day and Governor Snyder should ‘get a room’ to have their fun and take care of the rest of their intimate dirty business off the streets.  But they already have one in Orr’s luxury suite at the Book Cadillac.  And it’s Detroiters, not Jones Day’s elite clientele, who are getting fucked by these high class corporate thugs.

Everybody out to the US Federal Court House in Detroit at 231 West Lafayette Boulevard at 8:30 am on Wednesday, October 23, for the beginning of the trial on eligibility for bankruptcy – the proceeding in which Jones Day seeks to take away all Detroit’s most valuable assets and give them to the highest corporate bidders among their A-list corporate clientele.  Be there!

Tom Stephens is a people’s lawyer in Detroit. He has advocated environmental justice for over 20 years Email: jail4banksters@yahoo.com

Notes.


[i] http://www.freep.com/article/20130610/NEWS01/306100080/Kevyn-Orr-Wayne-State-University-emergency-manager-meeting

[ii]http://www.deadlinedetroit.com/articles/6731/update_detroit_cfo_sorry_for_having_offended_coworkers_with_angels_night_quip#.Ulggv1N5KSo

[iii] The literature on poverty as economic violence is vast, rich and far beyond the scope of this

emergency dispatch from the front line of US class warfare in 2013.  Here’s a sense of what I

have in mind:

Rev. Dr. Martin Luther King, Jr. precisely described one aspect  of the connection between

poverty and violence one year before his assassination, in terms of “…a very obvious and almost

facile connection between the war in Vietnam and the struggle I, and others, have been waging in

America. A few years ago there was a shining moment in that struggle. It seemed as if there was a

real promise of hope for the poor — both black and white — through the poverty program. There

were experiments, hopes, new beginnings. Then came the buildup in Vietnam and I watched the

program broken and eviscerated as if it were some idle political plaything of a society gone mad

on war, and I knew that America would never invest the necessary funds or energies in

rehabilitation of its poor so long as adventures like Vietnam continued to draw men and skills

and money like some demonic destructive suction tube. So I was increasingly compelled to see the

war as an enemy of the poor and to attack it as such. … A nation that continues year after year to

spend more money on military defense than on programs of social uplift is approaching spiritual

death.” (http://www.informationclearinghouse.info/article2564.htm)

The nature of poverty as economic violence both includes and transcends the state’s ages-old

funding of rich men’s wars rather than poor people’s families and communities.  It’s embedded in

an essential element of modern society that sits at the center of the ‘restructuring’ of Detroit; the

coercive power of the law administered by the wealthy and powerful governing elites in a

class society.  This reality of a violent mailed fist inside a velvet glove, which perhaps best

captures the essence of the Jones Day form of Wall Street government now imposed on Detroit,

was beautifully captured in Pablo Neruda’s poem:

The Judges

In high Peru, in Nicaragua,

throughout Patagonia, in the cities,

you’ve had no rights, you’ve nothing:

cup of misery, America’s

abandoned child, there’s no

law, no judge to protect your land,

your little house with corn.

 

When your chiefs came,

your masters, by now forgotten

the ancient dreams of talons and knives,

the law came to depopulate your sky,

to seize your revered fields, to debate the rivers’ water,

to steal the kingdom of trees.

 

They testified against you, stamped

your shirts, stuffed your heart

with leaves and papers,

buried you in cold edicts,

and when you awakened on the edge

of the most precipitous calamity,

dispossessed, solitary, vagrant,

they gave you jail, bound you,

shackled you so that swimming

you couldn’t escape the water of the poor,

so that you’d drown kicking.

 

The benign judge reads you clause

number Four Thousand, Third Paragraph,

the same used in the entire

blue geography liberated

by others like you who fell,

and you’re instituted by his codicil

without appeal, mangy cur.

 

Your blood asks, how were the wealthy

and law interwoven? With what

sulfurous iron fabric? How did the

poor keep falling into the tribunals?

 

How did the land become so bitter

for poor children, harshly

nourished on stone and grief?

So it was, and so I leave it written.

Their lives wrote it on my brow.

(Tr. Jack Schmitt)

At perhaps an even deeper level, violence and the poverty under any social order that is enforced at least in part by coercion – from police intervention to emergency management to war – exist in a virtually biological and physical, symbiotic relationship, as recognized by Bertolt Brecht’s poem:

On Violence

The headlong stream is termed violent
But the river bed hemming it in is
Termed violent by no one.

The storm that bends the birch trees
Is held to be violent
But how about the storm
That bends the backs of the road workers?

[iv] See, People ex rel Leroy v Hurlbut, 24 Mich 44 (1871).  An equally divided Michigan supreme court in Hurlbut precluded such a takeover.  Subsequent state litigation approved in 1873 restructured the department’s governance, but left it under the control of the City of Detroit until recently.  Mr. Hurlbut was the board chair of the entity that ultimately became the Detroit Water and Sewerage Department, and within the last few years the Board of Water Commissioners that governs the newly regionalized public utility.

[v] http://www.marketwatch.com/story/fitch-downgrades-detroit-mi-water-sr-and-sub-revs-to-bbbbbb-outlook-revised-to-negative-2013-04-01 and http://www.businesswire.com/news/home/20130401005535/en/Fitch-Downgrades-Detroit-MI-Sewer-Sr-Revs

[vi] Indeed, to add insult to injury, any significant attention to Jones Day’s launch of their latest municipal debt weapon of mass destruction was almost completely overshadowed by huge local stories: the draconian 28-year prison sentence of Kwame Kilpatrick on Thursday, October 10 (http://search.freep.com/sp?aff=1100&skin=&keywords=Kilpatrick%20sentencing), and the Detroit Tigers’ dramatic appearance in game one of the American League baseball Championship Series against the Boston Red Sox on Saturday, October 12, in which starting pitcher Anibal Sanchez and four relievers came within two outs of a historically unprecedented combined playoff no-hit game!  Has there ever been a more lopsided example of how emotional content trumps important factual data when it comes to getting public attention? (http://www.freep.com/article/20131013/COL38/310130090/Jeff-Seidel-No-no-hitter-No-problem-Tigers-get-win-they-needed)  Most importantly, if there are more than 12 people in Detroit outside the Jones Day city government itself, who have any more than the most basic understanding of the nature and importance of Emergency Manager Or[r-]der No. 17 at this point, I would be surprised.

[vii] http://www.detroitmi.gov/Portals/0/docs/EM/Order%2017.pdf

[viii] http://www.detroitnews.com/article/20130923/METRO01/309220048#ixzz2fihgbAQa