"Stockton tries a Chrysler"

Fix Pacifica: Bakersfield bankruptcy in stalemate
Wall Street Journal/Review and Outlook/Top Stories in Opinion, 12/31/12. "Stockton tries a Chrysler"

The municipal bankruptcy unfolding in Stockton, California is giving investors a bad case of deja vu. Just as the Obama Administration bailed out the United Auto Workers in Chrysler's bankruptcy while hanging bondholders out to dry, the city of Stockton is subordinating its bond debt to worker pensions.
But what's really scary is that the Stockton case could be replayed in dozens of California cities.

The San Joaquin Valley's second largest city filed for Chapter 9 bankruptcy this summer after a three-month mediation with creditors and unions ended in stalemate.
Bond insurers that guarantee about $200 million in debt wouldn't submit to a haircut unless the rich pensions that helped drive the city to bankruptcy were also clipped.
Yet unions wouldn't countenance an even modest reduction to their pensions.

.... Ratings agencies downplay the "systemic risk" that the Stocktons of the United States pose to the $3.7 trillion municipal bond market.
But then they also said mortgage-backed securities were Triple-A.
While the market may not be in danger of blowing up soon, bondholders face a very real danger of being blown off to preserve worker pensions.