Public Bankruptcy Talk Isn’t ‘Dangerous.’ Denial and Dereliction Are – WP Original
“Bliss just isn’t worth the price.”
By: Mark Glennon*
Dangerous talk of Chicago schools bankruptcy, — that’s the headline description today in a Crain’s story by Greg Hinz about Governor Rauner’s comments on the Chicago Public School system. Rauner is “pushing CPS or other governmental units into bankruptcy,” Hinz goes on to claim.
Really? Here’s what Rauner actually said:
I’m concerned that the Chicago Public Schools could end up needing to go bankrupt. That’s very possible. We have a mess. They would just have to restructure its debts and its contracts.
Earlier, he also said he supports legislative authorization for bankruptcy as an option for municipalities. That’s it.
If that’s “dangerous,” then so, too, were hearings in Springfield recently about a bill to authorize municipal bankruptcy, comments from the mayors of Rockford and Kankakee that went much further, and reporters (mostly out of state) who have been discussing it long before Rauner said anything. And we at this site must be downright subversive because we’ve been all over it.
Hinz asks if Rauner “gets” bankruptcy? Why, yes, actually, he had quite a bit of experience with it in the private sector as an investor. We know that from Hinz himself, who was plenty happy to write about it during the campaign. And if bond investors are scared off by something, would that be by what he actually said or by a mischaracterization of what he said as “pushing” CPS and others into bankruptcy?
A perfectly serious question is whether there’s anybody at Crain’s who gets municipal bankruptcy. We have linked on this site to all articles of any substance about municipal bankruptcy for Illinois, for several years. Crain’s hasn’t had one beyond the cosmetic. Not one.
Here’s a starter for them, from somebody who has done bankruptcy work, albeit for corporations: Frank talk about bankruptcy is helpful, not dangerous. Nobody invests in deniers. Nobody has confidence in leaders who don’t explore all options. Debate it thoroughly and fast so you can rule it out if it’s indeed the wrong way to go, as Hinz evidently has already concluded. If it’s unavoidable, do it fast and finish it fast.
In case it matters, I, too, regard municipal bankruptcy as a frightening trip into no-mans land. I don’t know exactly where it might be a good option, but I think it will be unavoidable for some municipalities, so it should be an authorized option — as it is in most other states. And I don’t know if Rauner thinks that actually exercising the option would be a good one, but I think that reporting that he does, when he didn’t say that, is what’s dangerous.
Ironically, the other half of Crain’s “sky-is-not-falling,” Rauner-bashing duo has an article today that’s quite relevant. Rich Miller’s article says Rauner is living in a bubble because he doesn’t read news sources himself, relying on staff briefings instead. But here’s the relevant part:
Those of us in the news business believe strongly that an informed public is necessary to a functioning democracy. The same applies to our leaders….Bliss just isn’t worth that price.
Here’s a fact for the guardians of informed democracy, as Miller sees himself and his colleagues: The debate whether to authorize municipal bankruptcy and what conditions to attach to it probably will be the most important decision for Illinois’s towns and cities in the legislature’s history. Cover it. Most of you haven’t. Tell us who supports it and why. Don’t tell public officials that honesty is dangerous. Give us the details on what conditions might be attached and on alternatives like that proposed by The Civic Federation. Get the opinions of genuine experts. Don’t just rattle off the usual quotes about making investors nervous (which the press usually gets from sell-side people in the muni industry who are talking their own book).
Bliss, indeed, just isn’t worth the price. It’s dangerous.
*Mark Glennon is founder of WirePoints. Opinions expressed are his own.