Judge's Ruling Makes Stockton, Calif., Most Populous City To Enter Bankruptcy | WAMU 88.5 - American University Radio

NPR : News

Filed Under:

Judge's Ruling Makes Stockton, Calif., Most Populous City To Enter Bankruptcy

Stockton, Calif., is now the most populous city in the U.S. to enter bankruptcy, after a decision by U.S. Bankruptcy Judge Christopher Klein on Monday.

Bloomberg News reports that Judge Klein said the city negotiated in good faith with its creditors, and that the creditors did not.

"Creditors, including Assured Guaranty Corp. and Franklin Resources Inc. (BEN) had argued that Stockton didn't qualify for bankruptcy because the city isn't truly insolvent, and that its leaders didn't negotiate a potential settlement in good faith.

Negotiation is a "two way street," said U.S. Bankruptcy Judge Christopher M. Klein in Sacramento, addressing creditors who he said didn't negotiate in good faith. "You cannot negotiate with a stone wall."

Klein said the bankruptcy was necessary so that the city could continue to provide basic services.

"It's apparent to me the city would not be able to perform its obligations to its citizens on fundamental public safety as well as other basic government services without the ability to have the muscle of the contract-impairing power of federal bankruptcy law," Klein said.

The bankruptcy protection will keep the city shielded from lawsuits from creditors, who otherwise would be free to sue in state court in order to force asset sales, cut city services or create boosts in revenue in order to pay debts.

According to the Associated Press, the $900 million that Stockton owes to the California Public Employees' Retirement System to cover pension promises is its biggest debt. The city so far has kept up with the pension payments, but that had forced them to neglect other debts.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

NPR

How Tinseltown Got Tipsy: A Boozy Taste Of Hollywood History

Mark Bailey, who detailed old Hollywood's legendary love affair with liquor in his book Of All the Gin Joints, shares stories from a bygone era over cocktails at a legendary Hollywood bar.
NPR

Want To Enhance The Flavor Of Your Food? Put On The Right Music

Researchers at the University of Oxford have discovered a link between what you taste and what you hear.
NPR

North Korea Has An Interesting Offer. And Another Threat

The secretive regime denies any involvement with the Sony Pictures hack and says the U.S. must allow it to help find the real culprit. Or else.
NPR

Hollywood Pros Fear A Chilling Effect After Sony Bows To Hackers

Some in the entertainment industry are wondering if they'll have to be careful now about the stories they tell or the jokes they make in the wake of Sony's withdrawal of The Interview.

Leave a Comment

Help keep the conversation civil. Please refer to our Terms of Use and Code of Conduct before posting your comments.