April 2, 2013

The city of Stockton, California officially went bankrupt yesterday. Instead of concern for what that might mean for its residents in terms of services and their quality of life, Fox predictably focused on one thing: public pensions. And, instead of doing any kind of real analysis of the pension issues, or delving into the pushy behavior of the Wall Street creditors, Stuart Varney suggested the whole problem is due to slacker public employees living high on the hog for decades after just a brief stint of work. He looked forward to pensioners taking the hit and expressed hope that the same would happen in other California cities, too.

Varney was nearly ecstatic over the federal bankruptcy judge’s ruling that allowed Stockton to go into Chapter 9 bankruptcy, and receive protection from its creditors. “Yes, I do, I do,” he crowed when asked if he liked it.

This ruling by this judge opens the door for Stockton to cut the payments that it makes to its pension fund. That opens the door for other cities in California to get out of their pension mess in the same kind of way. And it means, just a little way down the road, maybe existing pensioners will take a haircut.

Varney acknowledged to a less enthusiastic Brian Kilmeade that cities have “a moral responsibility to pay up on a contract” but he swiftly moved on to “the other side of the coin” which was to suggest that most pensioners are moochers. “Take for example a firefighter in the City of Stockton," he said. "They can retire at the age of 50 and they get 90% of their best year’s salary for the rest of their lives. You can work for just six months for the City of Stockton – just six months, that’s all it is – and you get lifetime health benefits. That’s all.”

And how many of those pensioners have worked for decades educating and protecting the public based on the promise of a comfortable retirement? While retiring at 50 may seem young to the 60ish Varney, I’d like to see him start hauling firefighter equipment and running into burning buildings before he sneers about retirement ages again.

Meanwhile, neither Varney nor Kilmeade said a word about the Wall Street creditors who are very much players in the Stockton bankruptcy. In fact, you could make an argument that they are gaming the system. From the New York Times:

In the ruling, issued on Monday in Sacramento, which affirmed the legal status of Stockton’s bankruptcy, Judge Christopher M. Klein said he could see battle lines being drawn between Calpers — formally the California Public Employees’ Retirement System — and the city’s other major creditors, including several Wall Street companies that either bought Stockton’s bonds or insured them. But he ruled that it was still too early in the case for that battle to be joined.

...The judge also said that California statute required all Chapter 9 candidates to go through a 60-day mediation period before declaring bankruptcy, and creditors were supposed to help pay the cost. But the capital markets creditors dropped out of mediation, he said, when they learned Stockton was not seeking any concessions from Calpers. That left the city to pay the whole bill.

"The capital markets creditors contend that the city gave them a take-it-or-leave-it proposition, and that that is not negotiation,” Judge Klein said. “I’m sorry. I’m not persuaded. Negotiation is a two-way street. You can’t negotiate with a stone wall. You cannot do it. It cannot be done. It is a contradiction in terms.”

In other words, this is shaping up as a battle between Wall Street and the public employees.

Varney continued, “On one side, you’ve got the moral obligation to pay on a contract that you signed. And on the other, the reality is, you can’t afford this. And for years, Stockton and other cities have been laying off young people so that they can pay the older retirees. What’s the morality here? Which side of the coin are you gonna choose on the moral compass here?”

It’s pretty clear Varney chose the Wall Street side of his “moral compass.”

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