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San Bernardino Council votes to file Bankruptcy

If you haven’t already heard, San Bernardino will become the third California city to file for bankruptcy this year, after officials conceded the city might not even be able to cover payroll through the summer. Faced with a budget shortfall of $45 million and city coffers that have already been drained, the San Bernardino City Council voted on Tuesday to file for bankruptcy. Andrea Travis-Miller, the interim city manager, told Council members before the vote that the city had very few options left. “I am concerned about our ability to make payroll, not only in the next 30 days but also in the next 60 to 90 days,” Ms. Travis-Miller said. “A major restructuring of this organization is needed.” Ms. Travis-Miller said it would take 30 days before city staff would be prepared to file the paperwork in bankruptcy court. Under a California law passed this year, cities must hire a third-party mediator to negotiate with employee unions and creditors before filing for Chapter 9 bankruptcy protections. However, cities can avoid this mediation process if they instead declare a fiscal emergency, which Mayor Patrick Morris said that San Bernardino planned to do. Karol K. Denniston, a partner at the law firm Schiff Hardin who helped draft the mediation legislation, said a long and difficult bankruptcy case might follow, because the city had skipped the mediation process. With 15 percent unemployment in the city, and a foreclosure rate in San Bernardino County that remains among the highest in the state, San Bernardino has been pummeled by the recession. As a result of the current City of San Bernardino’s financial hardship, many individuals will be forced into filing for either Chapter 7 or Chapter 13 Bankruptcy.

The Debt Supercommittee Close to Failing

The debt reduction committee that was established specifically to dissolve Washington’s congressional gridlock, is on the verge of failing altogether. The committees failure makes nearly $1.2 trillion in spending cuts a likely possibility.

According to a Democratic aide working with the committee it is highly unlikely that the committee will be able to reach an agreement on the deficit savings. The aide is not permitted to discuss the case and wished to remain anonymous. In the email from the aide, it is stated that the likelihood that the committee talks can be salvaged is very poor.

The Congressional Budget Office is set to receive information allowing them to score a proposal in advance of the November 23 due date that the supercommittee is supposed to be completing a deal. Mitch Mcconnell, Republic Senate Leader, declared that “failure is not an option” for the created supercommittee panel that was thrown together in August after a heavy session of conflicted voting by Congress. The panel was thrown together after debating about raising the nation’s debt limit and the issue received a dismal 9 to 14 percent approval by congress.

Both Republicans and Democrats got on the radio on November 21 to point the finger at each other for not reaching a deal in time. The Democrats claimed that Republicans would not budge on their anti-tax agreement and Republics claimed that Democrats would not go along with their revenue raising offer that will also cut spending.

 

Pointing the Finger

Jon Kyl, U.S. Senator of Arizona, said that the Democrats turned down a deal that would create $250 billion in revenue by getting rid of a few tax breaks. The deal would generate all of that money while lowering the income tax rates at the same time. Kyle said that the Democrats are a group of people unwilling to cut spending unless they are raising income taxes at the same time.

John Kerry a well known Massachusetts Democrat says that Kyl’s statement just isn’t true. He exclaimed that the Democrats were willing to agree to a deal that cut $917 billion in spending without any additional revenue. The agreement went along with the August plan to raise the debt limit. The most recent Republican plan results in the highest tax cuts since the Depression.

On November 21 European stocks took another drop for the third consecutive day. The U.S. futures backed off in fear of a Congressional impasse. Both the Stoxx Europe 600 Index and the MSCI Asia Pacific Index lost 2.1 percent and 1.3 percent respectively. As the U.S. futures backed off the Treasuries advanced.

The standard and Poor’s 500 futures fell by 1.4 percent and the benchmark gauge for the American equities declined by over 3.8 percent in the past week. The equities decline was the largest loss in the past two months and French, Italian and Spanish bond yields increased over the same period of time. Fitch ratings believes that the poor economic condition of Europe creates a risk for American banks as well.

A Fade of Optimism.

The supercommittee members barely retain any hope that their efforts will result in an actual deal, but nobody wants to give up hope states Jeb Hensarling on Fox Sunday News. The reality is slowly beginning to overtake the committee’s hope.

If the committee fails to come up with an agreement soon there is 1.2 trillion dollars in spending cuts set to take place on both defense and domestic programs. The lack of a deal will provide President Barack Obama with a method for offering insurance benefits and a payroll tax cut for unemployed Americans, both of which expire at the end of 2011.

 

 

 

Bankruptcy Judge is Releasing $520 million to MF Global Customers

The judge that has been in charge of the bankruptcy of MF Global Inc. is approving, and releasing around $520 million to the trading customers within the brokering firm whose accounts were frozen since October 31 due to the bankruptcy. This means that 60 percent of the funds being awarded by the judge are going to be returned to customers in a group in their cash only bank accounts. This money is supposed to start moving to these accounts before Thanksgiving Day.

This can prove to be a difficult task due to the fact that there are over 38,000 accounts that were frozen, and these accounts all need to be verified before money can be placed within them. The judge wants to eventually reward all of the funds back to the accounts which is estimated to be close to $600 million. MF global is New York based, and is led by Jon Corzine, a former NJ governor. He also is known for being the CEO of Goldman Sachs. They made the one bet on European debt, and this was the wrong move for the company which led to their bankruptcy in October.

It is still under investigation on whether or not the company used money from private, clients accounts to float the business as their condition became worse. This is a violation of the security rules of the company, and of the law. The Chicago Mercantile Exchange are the ones in charge of transferring the money to all of the accounts. These accounts are used for trading, and this is an important aspect for the country.

 

Florida Bankruptcies Down 17%, but Still No. 3 in the Nation

This is something that is shocking. As the bankruptcies are going down, and not up, the District is still number 3 on the top of the list of all bankruptcies. Florida’s bankruptcy rate was down over 17% from the last year. This means that it is much slower than it has been, but their spot on the records is not moving. They are at a stand still.

Still, within this year alone, the Middle District of Florida had close to 57,000 bankruptcies. This is much lower than the Central California District that came in at closer to 140,000 filings. The entire U.S. Filings went down a little over 8% this year, but the total of bankruptcies were still up over 1 million. There are a few factors to why the percentage has dropped over the last year, and they include, but are not limited to: more jobs being widely available, stabilization in the economy, federal programs that are there to assist the homeowners having trouble, and banks taking more care in fixing problems before moving forward with the process.

This does not mean the recession is over, or that no one will file for bankruptcy, but it does mean that the bankruptcies filed because of recession might be behind us. Those that have debt to file for bankruptcy with have already done so, and those that are unemployed and not able to pay off the debt are waiting until they can afford to do so. A lot of the people that are filing for bankruptcy are small business owners with failed businesses. Of course, it is not getting worse, but it is also not getting any better.

 

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