States Going Belly Up Part 12 - The Endgame

Jefferson County, Alabama finds the brick wall, with their face -

An Alabama Circuit Court judge said he intends to appoint a receiver to manage Jefferson County’s insolvent sewer system, two years after the bondholders’ trustee sued to improve the system’s operation and boost fees to repay more than $3 billion of debt.

Judge Albert Johnson said in court today in Birmingham that he will interview people for the position and decide on the receiver’s authority.

Jefferson County, which includes Birmingham and has more than 600,000 residents, has struggled to avoid the biggest U.S. municipal bankruptcy after a sewer refinancing arranged in 2002 and 2003 by JPMorgan Chase & Co. collapsed during the credit crisis.


Interest rates on the county’s floating-rate bonds rose to as much as 10 percent when companies guaranteeing the debt lost their top credit ratings because of losses on unrelated mortgage-backed securities. Derivatives tied to the debt worsened the crisis by further increasing borrowing costs.

Bettye Fine Collins, the Jefferson County Commission president, said her biggest concern is that a receiver would impose an immediate increase in sewerage charges. The commission governs the county.

The Real Effect
This county has been shafted repeatedly and individuals have gone to jail for the bribes and fraud that has been committed here. Here's where we need to pay attention though, notice several things in this story -

• The debt to the banks is assumed to be valid (As in not fraudulent)
• Who here thinks $3 billion for a sewer system is on the up and up?
• The judge could be bought off. (And when there is $3 billion at stake, who knows)
• The bank could take possession of the asset. (The sewer system)

So here we have an asset, the sewer system, which taxpayers pay for through their sewer bills, being viewed as the security on a debt. What is to stop the banks from being "repaid" by taking the whole thing over and used to add to JP's bottom line?

Law? What law? The one that was discarded when fraud was being committed?

This is the reality that we are looking at as the bailed out institutions can become monopolistic entities controlling whole swaths of the American landscape. All that is needed is a few dollars on the side to get the judges to look the other way.