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Bond Holders Sue Bankrupt City Over Pension Payments

The New York Times reported on what could be a seminal trial brought by bond holders caught in the Stockton, CA Chapter 9 bankruptcy case who claim that retired workers should share the pain. As other states and municipalities face bloated pension payments many cannot afford, there should be a lot of interest in the outcome of this week’s four-day trial on the part of mutual fund companies that hold the bonds and the insurers that guaranteed them, who claim that pensioners are getting an unfair deal.

CalPERS, which administers the Stockton public pension — and will soon be the city’s largest creditor — turned down the city’s plea for relief, fearing requests from other troubled entities. Stockton is concerned that city workers, especially police, will leave their jobs. While other state entities like Rhode Island have gained some measure of relief, California always seems to be the bellwether.

There’s a storm coming. Stay tuned.

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