Bondholders – You have been warned, twice now
There was a time when being a bond holder was considered a safe investment. That’s why interest returns on bonds are lower compared to investment alternatives. That was Pre-Obama. Thanks to the precedent set by the GM bankruptcy and now followed by Stockton, California, Bondholders are at risk. Liberals are unwittingly attacking the foundation of the very financial model they count on to fund their socialist dreams. Stockton will go bankrupt. Instead of rewriting insane union contracts and reducing member benefits, Stockton will opt instead to default on repaying debt to those who loaned them money. Give free money to unions. Don’t pay back money you borrowed. Yes, yes – I am sure some will argue the unions ‘earned’ that money. But in what universe can an employee retire at age 50 with 90-100% of the final year income and benefits – for LIFE? Did I mention the annual value of that package is 3X that of the citizenry that is getting stuck with the bill?
This is the same model Obama used for GM. Unions were protected at the expense of investors. The underlying issues remained. Obama loves to rage on and on about fairness. One set of rules and all that crap. Well, this is nothing short of CHANGING THE RULES AFTER THE GAME HAS BEEN LOST. GM made questionable business decisions. Unions made selfish demands that made GM’s profit model unsustainable. Did either of these parties pay? Nope, you did. The tax payer. The neutral investor. Fairness Obama style.
This is a temporary fix for Stockton. Instead of dealing with the fundamental causes of their financial problems they took the cowards way out. They will ‘wipe clean’ money they owe others and continue to protect unfunded, unfair liabilities to unions. The next group of investors that purchase bonds issued by Stockton should take note and say no. How else will liberals learn.