Just when you think it can’t get any worse, it does.
Chicago’s finances are an absolute disaster. The city is bankrupt..it’s as bad as Detroit; the only difference is that it just hasn’t gotten around to, or been forced, to own up to the truth.
City Journal has a superb analysis of Chicago’s fiscal woes, “Chicago’s Financial Fire” here. Aaron Renn does a superb job of dissecting the numbers. But even I was astonished at the latest wrinkle that so-called elected public servants will attempt in order to keep kicking the can down the road, and postpone the inevitable day of reckoning.
Here’s a brief synopsis. Moody’s recently downgraded Chicago’s debt. That’s caused Rahm Emanuel a whole bunch of problems. The city has somehow managed to borrow another $1.1 billion long term. These funds will be used to, among other things, pay “police back-pay.”
Yup, that’s right. The city is borrowing money , which it will be paying off for decades, with interest, so that it can pay its cops the money it already owes them.
This is the equivalent of you taking a vacation to some exotic locale, and then taking out a 30 year mortgage on your home to pay the bill.
But wait, it gets even worse. Really.
Included in the details of the bond offering is this little gem. $170 million of the $1.1 billion, or 15% of the funds is earmarked for “capitalized interest.”
What it means is that Chicago is borrowing the money to make the first two years of interest payments on the new bond issue. It can’t even afford to pay the vig on the new loan.
That mean, with a hat-tip top Gertrude Stein, that in the Windy City, “there’s no there, there.”
Wimpy would just love it.
Nada!, Zilch! Zero! The jig’s up..it’s over!
There isn’t enough wallpaper on the planet to cover up this mess.
The underwriters who bring this drek to market ( while raking in big fess off the top) should be shot.
Any portfolio managers who buy this should be drawn and quartered.
When we look back, this may well be the signal that the financial apocalypse is indeed upon us.