Motor City revved up in court

A bond insurer on Monday struck a blow against Detroit’s proposal to exit bankruptcy, arguing in a new lawsuit that Detroit’s approach would illegally discriminate against the city’s third-biggest group of creditors — the investors who provided $1.4 billion for its workers’ pensions nearly a decade ago. Those investors bought “certificates of participation,” which were the first securities Detroit defaulted on as it prepared to file for bankruptcy last summer. The city now contends that the 2005 borrowing was a “sham transaction” and is proposing to give the investors who bought into it one of the lowest recovery rates in its bankruptcy. The insurer, the Financial Guaranty Insurance Company, said in its lawsuit that Detroit “seeks to turn a crooked eye to history.” It said the city had benefited greatly from the transaction but was now pretending to be “the innocent victim of fraud perpetrated on a grand scale.” They better fix this because the new lawsuit could have far-reaching consequences. It might lead to a bigger recovery for the investors who hold the certificates and smaller losses for Financial Guaranty and another insurer, Syncora, which insured them. But it might also lead to a fight to claw back the $1.4 billion from the city pension system, which would throw a wrench into Detroit’s efforts to cushion its workers and retirees from some of the pain as it attempts to resolve its outsized debts. The city's leaders are just as clueless as David Moyes when it comes to fixing up Detroit's financial quagmire. In fact, it should be known by all that Eminem and Pam Dawber are the only two people from Detroit who are of any worth to a modern, civilised society (and no, it's not because they're both white).