News Column

JPMorgan Chase CEO: Detroit pensions 'should be protected'

May 21, 2014

By Nathan Bomey, Detroit Free Press



May 21--JPMorgan Chase CEO Jamie Dimon said Detroit's bankruptcy likely won't have a lasting effect on Michigan's borrowing costs or the municipal bond industry, even as bondholders cry foul about the city's proposed debt cuts.

Dimon also said today that he's "very sympathetic to people who have pensions of $20,000 a year" in Detroit.

The average Detroit civilian retiree pension is about $19,000.

"I personally think they should be protected," Dimon told the Free Press editorial board.

Dimon said creditors often have legitimate complaints in bankruptcies, but he suggested that Detroit's restructuring plans won't undercut the state's economy.

"I don't think it will affect Michigan's borrowing capacity very much," he said.

Dimon is visiting the city to promote the bank's plan to provide $100 million in grants and loans to promote economic development, blight removal and job creation in Detroit.

Detroit emergency manager Kevyn Orr has proposed paying 10 cents on the dollar to limited-tax general obligation bondholders, compared to as much as 60 cents on the dollar for unfunded pension claims. Municipal finance analysts have suggested Detroit's plan could have a ripple effect on the entire industry.

Orr also wants to wipe out a $1.4 billion debt deal brokered by Mayor Kwame Kilpatrick in 2005 to fund pensions, calling the entire structure of the deal a "sham."

Major bond insurers that backed the debt, Financial Guaranty Insurance Co. and Syncora, have vigorously sought to block the cuts.

Dimon said he's "not an expert" on Detroit's bankruptcy, but "bondholders know they take a risk when they lend money."

He also warned that municipal financial crises are looming.

"I would put it as a serious issue," he said. "It's like the train you see coming down the tracks 10 years down the road."

Contact Nathan Bomey: 313-223-4743 or nbomey@freepress.com. Follow him on Twitter @NathanBomey.

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(c)2014 the Detroit Free Press

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Source: Detroit Free Press (MI)


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