This article first appeared online at TheNewAmerican.com on Wednesday, May 13, 2015:
Moody’s cut its rating on another $4 billion of Chicago’s debt to just above junk status, for a total of $13 billion that was downgraded on Tuesday. This is approaching two times the city’s total annual revenues, and fails to take into account the $550 million payment the city must make in December to keep the police and firemen’s pension plan solvent. Nor does it take into account the $230 million penalty the city must pay for terminating previous “swap” agreements that allowed it to continue to borrow at competitive rates.
With this two-level drop, $2 billion in additional penalties may come due, according to Moody’s: “[Our] current rating actions give the counterparties of these [swap] transactions the option to immediately demand up to $2.2 billion in accelerated principal and accrued interest [payments] and associated termination fees.”
Doing the math is frightening. But Chicago’s Budget Director Alex Holt seems unconcerned: