Tuesday, June 04, 2013

Kevyn Orr Speaks to Detroit

When Governor Rick Snyder appointed Kevyn Orr to be the emergency manager for the City of Detroit, our governor promised, "We will be completely transparent about this process. If anything, we are going to err on the side over-sharing information."

Since then, their track record for over-sharing information, speaks for itself. I was pleased, therefore, when Kevyn Orr decided to take a break from his regularly scheduled public meetings and press conferences to talk with a small blog such as this one.

The following is an interview between Kevyn Orr and the staff of this blog. It happened earlier this afternoon at Chick's Bar (18550 W. Warren Ave.) in Detroit's Warrendale neighborhood. An unedited transcript of this interview appears below.

Warrendale (Detroit) Blog
Welcome to Warrendale, Mr. Orr, and thank you for taking time out of your schedule to talk with me about the future of this neighborhood and the rest of Detroit.

Kevyn Orr
Thank you, Frank. It's good to be here. I hope this interview won't turn out to be like that one you did with former Police Chief Ralph Godbee last August.

You know, that interview played a big part in Chief Godbee getting pushed out of office just a few days later.

Warrendale
Bank Loan - Illustration by Svilen Milev
Of course, Mr. Orr. I take these interviews very seriously.

Now, if we could begin, I would like to start out by discussing the LIBOR scandal and how it relates to hundreds of American cities, including Detroit.

As you are no doubt aware, towards the end of former Mayor Kwame Kilpatrick's tenure, the City of Detroit refinanced some of its long-term debt through the Union Bank of Switzerland (UBS). This enabled the City of Detroit to trim a little more than half a mil from its property tax rates. However, the rate and terms of this refinancing were tied to the LIBOR rate.

When the LIBOR rate jumped unexpectedly, and the City of Detroit wasn't able to meet those higher payments, it resulted in the City of Detroit's debt load ballooning. We as a city suffered losses somewhere between $3.5 - $5 billion, which is almost a third of our total debt load.

More importantly, we now know that those jumps in the LIBOR rate were not only manipulated, but manipulated illegally. Three bankers have already faced criminal charges as a result of this. The U.S. Justice Department, as well as regulators in Switzerland and the United Kingdom, imposed $1.5 billion in fines against UBS for their role in the LIBOR scandal.

Mr. Orr, several other American cities, and counties have sued the banks to recover their costs from LIBOR manipulation. Why hasn't the City of Detroit already done so?

Orr
Well, first and foremost, I wouldn't say that LIBOR was manipulated. It was more of a massaging - and people like massages, right?

Warrendale
Not when those massages cost $5 billion.

Orr
Well, forget about how much the cost for a moment...

Warrendale
How do you forget about $5 billion? Especially when we are considering a host of drastic actions, like selling art from the DIA and animals from the Detroit Zoo.

I know UBS is one of your former clients, but even they admit that they cheated us at this point. Other cities like Oakland, California as well as Riverside and Richmond, California have all filed lawsuits against the banks to recover their losses from LIBOR manipulation. Why shouldn't Detroit file similar litigation?

Orr
Frank, do you really want Detroit to be more like Oakland, California?

Warrendale
Well, if it means that...

Orr
Exactly. No one wants to be like Oakland, not even Oakland.

Warrendale
But it's $5 billion that we were cheated out of!

Orr
Oh, sure - we could file a lawsuit against my former client. We could do it today, but lawsuits take time to work their way through the court system. There are motions and counter-motions. It could be several months before the City of Detroit got a judgement against UBS.

If there's one thing that Governor Snyder has made crystal clear to me it's that Detroit can't wait. He said so himself several times. Detroit can't wait.

Warrendale
Wait! Are you seriously suggesting that the City of Detroit should sell art from the DIA, animals from the Detroit Zoo, and so on - all to pay the money that was charged to us illegally? And your only reason for doing this is that it would take too long to sue the banks?

Orr
Art. Animals. Buses. Belle Isle. We need to sell whatever we can to make those payments to UBS and the other banks. Detroit can't wait for us to do it any other way.

Warrendale
Is there anything that you wouldn't sell?

Orr
Yes, the Rackham Golf Course in Huntington Woods is off-limits for a sale - at least for the time being.

Warrendale
Why wouldn't you sell that?

Orr
One of the other mandates that I've been given by Governor Snyder is that only people from West Michigan are allowed to buy our golf courses.

Warrendale
And they're not interested in Rackam?

Orr
Not right now anyway. They spent too much on Amway products. Maybe next quarter.

Warrendale
I think I need a drink.

Orr
Well, we are in a bar.

Our interview was interrupted at this point while I poured a boomba of cheap, draft beer down my throat.

Orr
Feel better?

Warrendale
Not really, but let's continue anyway. Mr. Orr, could you explain how a finance guy like you could "overlook" paying taxes on your Maryland home to point that you almost faced a foreclosure yourself.

Orr
Yes, that was incredibly embarrassing. I thought I had until next summer to get that done.

Warrendale
Why would next summer have made a difference when it comes to paying your property taxes?

Orr
By next summer, I'll be finished with my stint here. The statue of limitations for the City of Detroit to sue my former client will have lapsed and I will collect a huge bonus from my old law firm, Jones Day.

With that, I will move into a new house that I'm going to have built. It's going to have one of those really special pools in it, like you see in the movies.

Warrendale
You mean, one with an infinity edge?

Orr
No, that's too ghetto. I'm getting one that's filled with my bonus money from Jones Day and UBS - kind of like the one that Scrooge McDuck used to have.

You simply cannot get a pool that's anymore special than one that's filled with money.

Warrendale
I think I'm going to need to do a lot more drinking. Before I do that, though, I should end this interview with one more question.

Mr. Orr, is there anything else that Detroiters should know about the future of their city?

Orr
Future? Detroit can't wait for a future. We need to start selling stuff and paying UBS right now.

Warrendale
Well, thank you for your time, Mr. Orr. I'll let you get back to your day. I have some more drinking to do.

Orr
Always a pleasure, Frank.

Obviously, this is a work of political, economic, and legal satire. However, the issues highlighted in it are real. The links above will take readers to articles from the BBC and other sources that talk about these issues without putting their tongue into their (or anyone else's) cheek.
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