Rush Limbaugh on Stockton bankruptcy

April 5, 2013

By John Seiler

Unlike most East Coast commentators, Rush Limbaugh knows something about California. Sacramento, where he launched his radio show in the 1980s, is his adopted home town. What he said on his show about the Stockton bankruptcy is interesting:

“But we’re not in a depression. We’re not even in a recession. We are said to be practically in a booming economy, at least according to the new normal of this [Obama] regime. But the story has now moved on from Stockton going bankrupt. The question now is: Who is going to get paid? Who’s going to be first in line in the bankruptcy, Stockton’s creditors or the city workers — the union city workers or the bondholders? Stockton, by the way, is city of 300,000 people. Last June, they filed Chapter 9 bankruptcy protection.

“The bondholders, people that have muni bonds for Stockton, took them to court. The bondholders argued first that the city hadn’t done everything possible to pay their debts like sell real estate assets. They then argued that the bondholders were being unfairly hit with most of the pain of the bankruptcy. Although bonds account for only 7% of the city’s total budget, the City of Stockton is demanding that the bondholders absorb 44% of the concessions. In other words, the bondholders are being told to forget 44% of what they’re owed. Government unions, on the other hand, were not asked for any concessions in their pension plans. And make no mistake: This is a bankruptcy due to the unfunded future liability of pensions that they can’t possibly pay….

“This is a city in bankruptcy because it cannot pay its promised pensions to union employees.  They just don’t have the money.  So the bondholders have been told that they aren’t gonna be paid back very much so that the union workers of the city can get a sufficient amount of money in the bankruptcy.  Why is that?  Well, it’s real simple, folks.  The bondholders don’t need the money.  They are rich Wall Street maggots.  They’re investors.  They can stand to lose a little money. They ought to lose a little money, find out what it feels like. They’re the parasites anyway, they’re the ones that run around and make all this money on Wall Street and they live all these lavish lives and they need to find out what it’s like here. 

“It’s the same thing that happened with the bondholders at General Motors.  The bondholders come before stockholders in the natural pecking order, in terms of investor importance, you know, where investors rank on the scale.  Bondholders are higher than stockholders.  The bondholders came under personal insult and criticism from President Obama during the GM bankruptcy.  They didn’t need that money, they were greedy, they wanted their money back.  In the case of Stockton, this may well be the first American city to force bondholders to take less than the principle that they’re owed on government bonds. 

“Now, you may be an investor in Stockton municipal bonds.  You may not know it, depending on what kind of IRA or 401(k), what kind of investment plan you have. Somebody invests your money, you don’t know where it all goes. You could be a municipal bondholder in Stockton.  And you’re not a Wall Street person, but you’re not gonna get anywhere near back, as they divvy things up in bankruptcy, what you put in, even though you ought to be first compensated.  Bondholders ought to get it first.  The reason they’re in trouble is they can’t pay these pensions. 

“Stockton is probably not gonna be the only California city to have to file.  Yesterday, the US bankruptcy court in Sacramento, Judge Christopher Klein, sided with the city and allowed them to continue restructuring under Chapter 9, and his ruling could very well mean that Stockton will be the first American city to force bondholders to take less than the principal that they are owed on these bonds.  The same thing when Obama took over General Motors, he told their bondholders to take a hike.  Their legitimate investment was deemed worthless. They were pariahs and greedy for wanting their investment back in a bankruptcy proceeding, and the company was given to the United Auto Workers.  So much the same thing is happening in Stockton….

“Here’s an example, just one example of a circumstance that illustrates why Stockton, California, is bankrupt. The average firefighter — and we love firemen here. Don’t misunderstand. But the average firefighter in Stockton costs the city $157,000 a year in pay and benefits, and this firefighter can retire at age 50 with a pension equal to 90% of his highest year’s salary and free lifetime health benefits. You can’t afford that, folks.”