Bankruptcy for States ‘Would Finish Off What’s Left of Federalism’

[Elderberry]

Breitbart by Robert Kraychik 24 Apr 2020

Federalist Society Expert: Bankruptcy for States ‘Would Finish Off What’s Left of Federalism’

Allowing states to declare bankruptcy would end federalism and convert states into wards of the federal government, claimed John Baker, professor emeritus of law at Louisiana State University and Federalist Society contributor, offering his analysis on Friday’s edition of SiriusXM’s Breitbart News Daily with host Alex Marlow.

On Wednesday, Senate Majority Leader Mitch McConnell (R-KY) expressed support for allowing states to use bankruptcy to discharge certain liabilities. “I would certainly be in favor of allowing states to use the bankruptcy route,” he said. “It saves some cities, and there’s no good reason for it not to be available.”

“[Mitch McConnell] is suggesting amending the bankruptcy code to allow states to go into bankruptcy court and go through a process the way that cities and other municipalities are able to do under a chapter of the bankruptcy code,” said Baker. “There are good reasons why states cannot do this and should not ever be able to do it.”

Baker continued, “States have residual sovereignty. Like the federal government, neither can be sued without their consent. That’s the nature of sovereignty. This proposal, if ever enacted, would finish off what’s left of federalism.”

More: https://www.breitbart.com/radio/2020/04/24/federalist-society-expert-bankruptcy-for-states-would-finish-off-whats-left-of-federalism/

[Elderberry]

“The choice is not simply bankruptcy or bailout,” Baker stated. “There are other choices. We have had states in the 19th century that defaulted on their obligations. The state of Mississippi, and other states, have not paid off debts from the 19th century, but 20 years ago, Mississippi was shocked when it went into the international market to borrow some money to find out that the London bondholders still had them on a blacklist, and they couldn’t borrow money in the international markets.”

Baker went on,”California and Illinois need to be treated like the third-world countries that they are.”

“Third-world states” should be treated “like Argentina,” advised Baker. He reflected on Argentina’s 2001 defaulting on its sovereign debt as a guide for how to proceed with states seeking an escape from their liabilities.