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.”