

The scandal of the Alabama poor cut off from water - eftpotrm
http://www.bbc.co.uk/news/magazine-16037798

======
Newgy
The real scandal is the long pattern of corrupt political leadership of
Birmingham.

Birmingham was once an industrial capital, and in the middle of the last
century was bigger than Atlanta, and in many ways better positioned
economically to lead the south east. High taxes and a corrupt political
culture drove Birmingham into the dirt. A couple generations later, Atlanta
has one of the busiest airports in America, world-class universities, and
hosted the Olympics, while Birmingham can't provide running water.

Elections matter.

~~~
dp1234
And this is why instead of a large city of Birmingham, you have a large amount
of spun off mini-cities in the area each with their own schools and municipal
infrastructure (Hoover, Mountain Brook, etc). Of the many friends I know that
live in Birmingham, none of them actually technically live in the city of
Birmingham.

~~~
_delirium
The separate school districts of Birmingham suburbs aren't exactly due to
corruption... many of them emerged in the 1950s-70s as a way of evading
desegregation.

------
noonespecial
_He says he finds it cheaper to buy drums of water from a petrol station and
pay a sanitation company about $14 a month to remove waste from his "porta-
potty" than pay the combined sewer and water rate bill, which some months can
reach $300._

What really happens at the very end after all of the brouhaha about
derivatives, crooked politics, and mortgage disasters? _The people go back to
using outhouses._ Pardon the pun: Shit just got real.

~~~
mahyarm
More like the market made something that should be more expensive cheaper due
to crony behavior.

~~~
electromagnetic
Ironically the creditors are going to force the city to face FTA potentially
10-25% yearly increases in sewer rates, they'll never make their money back
because the portable toilet distributor is going to start selling water by the
drum too.

Once people see their neighbour doing it, they'll do it. Especially when it's
potentially saving them hundreds of dollars. So then the creditors will want
hikes of 50-100% annually.

It's an awful mess of crooks and greed. I don't get why the creditors decided
to fight these people in court and add in legal expenses when they could have
just said "we'll cut the interest rate if you pay over a longer term".

I'm sorry but my business mind tells me that some money is better than no
money.

~~~
waterlesscloud
Looks like the bankers did agree to forgive $1 billion and refinance another
$2 billion. The higher rates are part of the plan to avoid bankruptcy even
under those terms, though.

[http://www.msnbc.msn.com/id/44552659/ns/us_news-
life/#.TulFl...](http://www.msnbc.msn.com/id/44552659/ns/us_news-
life/#.TulFlFy9glh)

~~~
electromagnetic
Given that the budget was set at $300 million, any payments over $1 billion
are absurd by even the worst crooks in regular government.

A 1000% markup on a project should be illegal however it happens. Sorry, if a
company wants to overrun the same should apply as to my mechanic 30% above
estimate and you pay the rest. Government would have paid $400 million, sounds
about right for a cost overrun to me, not $3 billion.

------
muhfuhkuh
So, corrupt banks corrupted some politicians. Again.

And, now I read that Goldman Sachs is literally hoarding aluminum in gigantic
warehouses to manipulate the market.

I wonder when people start to realize that concentrating money like this is
not a good idea.

~~~
ericdykstra
You say the banks "corrupted" politicians, like those politicians were clean
and just hung around with the 'bad banking' crowd one afternoon.

~~~
rbanffy
It's still true that had the banks not bribeed them, they wouldn't have made
this specifc decison that caused this specific mess.

------
donaldc
_But the bill soared to $3.1bn after construction problems and a series of
bond and derivatives deals that went sour in the financial meltdown of 2008._

 _Investment bank JP Morgan Securities and two of its former directors have
been fined for offering bribes to Jefferson County workers and politicians to
win business financing the sewer upgrade._

Fined? That level of punishment seems insufficient.

~~~
waterlesscloud
People have gone to prison over this scandal

[http://blog.al.com/spotnews/2010/09/five_men_convicted_in_je...](http://blog.al.com/spotnews/2010/09/five_men_convicted_in_jefferso.html)

~~~
waterlesscloud
Including commissioner Chris McNair, whose daughter was one of the four little
girls killed in that KKK church bombing.

------
ChuckMcM
One wonders if the 'fine' for this sort of behavior could be 'JP Morgan will
provide the city of Birmingham the infrastructure to provide sewer and water
service to the town, once complete they will transfer all titles and interest
over to the town at no charge.'

The current consequence of 'pay some fines' doesn't serve the public, nor does
it discourage the abuse. Restitution here is that the city doesn't have a
sewer and water system. By having JP Morgan fund the building and provisioning
of such a system and then handing it over debt/bond free to the city, the city
is made whole (they have their sewer system), JP Morgan is punished (they paid
for it), and hopefully they are discouraged from future attempts at bribing
folks.

~~~
yummyfajitas
It's pretty clear from the article that JP Morgan is not the sole cause of
these problems:

"But the bill soared to $3.1bn after _construction problems_ and a series of
bond and derivatives deals that went sour in the financial meltdown of
2008...[the county] faces a budget shortfall next year of $40m after a _local
tax was declared illegal_."

Clearly, someone involved with the construction is partially at fault, as are
politicians for basing their budget on an illegal tax.

So it would certainly be excessive and unfair for JP Morgan to foot the bill
for the entire sewer and water system.

~~~
UrbanPat
I live in Birmingham, so I need to correct a couple things. First, the
"illegal" tax has been around a long time. In this particular case, it was
overturned on a technicality [1]. However, because the state government is
hostile to Birmingham, it has been impossible to replace the lost revenue.
However, that's relatively unimportant, because the sewer budget is separate,
and funded only by sewer system revenues.

Secondly, the construction problems, common among massive public projects,
really weren't the problem. The problem is that County Commissioners were
BRIBED by bankers into taking out unwise interest rate swaps in 2003. I
believe all five commissioners from that period have been convicted of
corruption, particularly Larry Langford, commission president. [2]

The reason for the bankruptcy is less that interest rates rose, but primarily
the freezing of the market for municipal bonds during the 2008-2009 recession.
Bloomberg explains, "After some bond insurers incurred losses on subprime-
related securities, threatening the credit ratings they used to guarantee
other Jefferson debts, investors in 2008 dumped the sewer securities on banks
that had agreed to act as buyers of last resort. That triggered contractual
requirements for the county to pay off $850 million of the debt in four years
instead of the 30 or 40 under the original agreements, according to government
records." [3]

So it is clear that BOTH bankers and our local politicians are at fault for
this problem. Both acted illegally. Our politicians are in jail, but the
guilty bankers are not. So, yes, I think JP Morgan should pay a substantial
penalty for this.

1:
[http://blog.al.com/spotnews/2011/03/alabama_supreme_court_ru...](http://blog.al.com/spotnews/2011/03/alabama_supreme_court_rules_je.html)
2: [http://www.inthepublicinterest.org/case/jp-morgan-
investment...](http://www.inthepublicinterest.org/case/jp-morgan-investment-
consulting-fraud) 3: [http://www.bloomberg.com/news/2011-11-09/alabama-s-
jefferson...](http://www.bloomberg.com/news/2011-11-09/alabama-s-jefferson-
county-votes-for-biggest-municipal-bankruptcy-in-u-s-.html)

~~~
yummyfajitas
According to your link [2]:

"The county paid $120 million in fees -- six times the prevailing rate - to
buy interest-rate swaps from J.P. Morgan, Bank of America, Lehman Brothers and
Bear Stearns.

Within five years, the bad advice had increased the county's debt by $277
million."

Hmm, let me do some quick arithmetic - is $277M < $3.1B? I believe it is, and
I therefore stand by my claim that JP Morgan is not solely responsible for
this problem. However, I'm all in favor of sending anyone involved in bribery
to jail.

It looks like the real problem is that the county decided to make long bets on
housing and lost.

~~~
UrbanPat
For the record, I'm certainly not saying that JP Morgan is the only
responsible party. Clearly our politicians are at fault, and thus the voters
as well.

But if you'll read [3] (far more explanatory than [2] about the details),
you'll see that the problem isn't the size of the debt that brought the county
down -- it's the contractual obligation to pay it off early.

You're right - the county did make long bets on housing. They attempted to
expand the sewer system to growing areas to boost revenue. But the bankruptcy
was primarily a result of the interest rate swaps.

EDIT: The original reason for the debt was a court order to reduce the
pollution from the sewer system. The county also tried to expand the sewer
system at the same time to increase the revenue base. The debt was unavoidable
(though larger than it could have been without the additional expansion). The
interest rate swaps were applied to the debt later. These are what JP Morgan
sold, and what caused the bankruptcy.

~~~
yummyfajitas
_These are what JP Morgan sold, and what caused the bankruptcy._

Yes, but that doesn't mean JP Morgan is responsible for the bad decisions of
the county. Similarly, if the county bet $3.1B at the horse races, they'd have
no right to go complain to the racetrack when their horse lost.

That would be true even if the racetrack let some county employees sit in the
VIP box.

~~~
UrbanPat
I disagree. The racetrack is a bad analogy, particularly when bankers are
specifically hired for their advice. If I sell you a car I designed and the
car blows up from a design flaw several years later, I'm culpable. If you
hired me specifically to advise you on which car to buy, I'm even more
culpable. And If I bribed you to pay me four times the going rate for this
really bad advice, then I'm REALLY culpable.

And this bribery wasn't some minor ethics violation. They didn't give away
free meals. The president of the county commission received $236,000 in gifts
from an investment banker.

~~~
yummyfajitas
I never disputed that JPM deserves penalties for the acts of bribery performed
by their consultants. However, the penalty for bribery should be proportional
to the $227M they gained from bribery. About 91% of the county's debt, or
$2.8B, has nothing to do with acts of bribery.

And in general, giving advice does not make you culpable for movements of the
market. A car can be expected to drive reliably within certain parameters, but
investment vehicles are not cars. TD Ameritrade gives me investment ideas all
the time, but I don't get to demand they pay me if I buy AAPL and it goes
down.

There are exceptions for negligence - e.g., if I say "I want a long position",
and they advised me to buy a put.

------
JWLong
At the risk of being accused of trolling:

Am I the only one here that believes that running water is a luxury, not a
right?

I've been in some pretty shitty situations myself, though none as tough as
this. That much I freely admit. But the overall tone of the article seems to
be one of horror that people might not have a ceramic toilet which flushes the
waste away to a sewage treatment plant. Also, an attitude of "This is a first
world country; this shouldn't be happening to anyone". (Yes, I noticed the
sidebar on "corruption")

Does everybody else think that running water/sewage is a right?

~~~
MaxGabriel
Certainly from a libertarian perspective, water and sewage are not. For
philosophers like Rothbard, humans have a natural right to not being aggressed
against--but not a right to, say, health. Similarly so for authors like Hoppe
and Nozick.

All of them believing in libertarianism for consequentialist reasons as well,
they would probably view this story as testament to the failures of
government, and what happens when it is coopted by businesses.

Edit: I also want to disagree with the other commenters that issues of
'rights' don't matter. Sure, if you're only judging things by their
consequences, then that discussion is moot. But having a moral position
against the coercion of government (I'm going to take your money to build
sewers, roads, engage in multiple wars, etc) is a legitimate stance--even if
you disagree with it.

~~~
scarmig
Well, you can draw further distinctions between Rothbard and Nozick (don't
know too much about Hoppe). Nozick would support a minimal state whose sole
job was to protect property and was financed by government coercion.

Rothbard would go further, though, and say even that minimal state is too
much, as it is still coercing people to fund government activity (police
protection of property). Even as that end of property enforcement is just,
it's still using an immoral means to achieve it.

Which just goes to show that one man's right that deserves government
protection is another's coercion. I respect Rothbard's consistency, because
it's quite problematic for the run-of-the-mill libertarian to argue for some
forms of positive liberty (the right to government provision of property
enforcement) while saying that other forms of positive liberty are
categorically unjust (such as, say, the right to government provision of
running water).

~~~
rayiner
Rothbard is like Plato. Interesting thinker from a historical perspective, but
it's not like we still take the Earth, Wind, Fire, Water thing seriously.

That particular strain of libertarianism is indefensible on anything other
than religious grounds ("Property is a god-given right while water isn't") or
something equally metaphysical.

~~~
scarmig
Hmmm, I agree and disagree with you.

I doubt Rothboard would describe his viewpoint as being simply that "property
is a god-given right while water isn't," even if you exclude the god-given
part. It's more that property is an institution that develops from organic
human action and self-organization. And in his vision people end up self-
organizing into groups that will defend some version of property rights using
threat of violence if necessary, and he goes further and thinks that, due to
the nature of the market of violence, most will converge onto roughly similar
versions of property that are best suited for human living.

My take on that is that this has already happened, but as it turns out the
market of violence lends itself to aggregation and monopoly. We call this
monopoly supplier of violence the State, which has found it utility maximizing
to form a set of contracts, implicit and explicit, with most of the different
parts of society, including price discrimination, loss leaders, etc.

In other words, Rothbard left out public choice and the economics of the firm,
and when you add those into anarcho-capitalism you get... social democracy.

I deeply admire, though, his capability to imagine a different, more
decentralized, and free-er world. Like most visionaries, his greatest flaw and
strength is his utopianism.

------
hmottestad
So I wonder...should I point and laugh or sit down and cry. It's not my
country, and I would never want to live in the US. How a country treats it's
least fortunate says a lot about the country in general.

I don't think lowering the standard of living is going to get us very far in
this world. What we desperately need is for everyone to contribute to society.
This is usually done by having healthy citizens with a high level of education
so we can find better ways of solving today's problems.

But sure...two steps back, one step forward.

~~~
forrestthewoods
This isn't a matter of how the country treats it's least fortunate. The issue
is biggest county bankruptcy in the history of the country. And the issue that
caused that is a level of fraud of massive proportions. The county has $4.1
billion dollars of debt.

Unfortunately services provided by private companies are not a right. You can
call access to water a "right" and that's a reasonable claim. Now what does
that actually mean. Do I have the right to demand free water from a private
company riddled with debt? Do I have the right to demand free water from you
personally? Or for you to pay my bill? Or for my bill to be reduced to zero?
Or for someone to work at a utility company for free so that the utility
company can provide a free service? Does that then mean that the utility
company has a right to demand free parts from local supplies companies so that
the can provide a free service?

Maybe the utility companies should be nationalized and all citizens can
contribute tax dollars to the service. It wouldn't surprise me if that's how
it's done in a lot of Eurozone countries? I'm not sure. I don't even really
understand how the fraud occured and who is on the hook for the bill. It is
however fair to say that it's way more complicated than "how a country treat's
it's least fortunate".

~~~
UrbanPat
I'm confused - are you suggesting the sewer is provided by a private company?
The sewer system in Jefferson County is publicly run.

And maybe that's part of the problem. Presumably a private sewer company could
declare bankruptcy, sell its infrastructure, and let someone else provide the
service. But with a public utility, we're stuck.

------
grannyg00se
There are people who form groups that voluntarily get off of the grid to seek
independence. No city water, no city sewage, no grocery shopping.

It seems to me that if most of these people are on welfare in an area with a
pretty good climate and what appears to be (from the photos) low population
density, this would lend itself very nicely to getting off of the grid.

Instead of relying on the government to support them, they could farm. Instead
of worrying about running water and sewage, they could irrigate and fertilize.
Instead of worrying about hydro bills for lighting they could use small scale
solar.

<http://en.wikipedia.org/wiki/Permaculture>

------
bdunbar
_How a country treats it's least fortunate says a lot about the country in
general.

what a disgrace!!! the richest country in the world can't provide running
water to its citizens... what a shame!!!_

Did anyone else notice that the linked article doesn't come right out and tell
us how many people are using outhouses instead of the city sewer? One lady who
may cut off service, one guy who has. The number of guys like this is said to
be growing.

Outrage is fine and dandy.

But shouldn't you find dig around so you know what you're outraged about?

~~~
lftl
I'm a resident of Jefferson County and a ratepayer for the sewer system, and
as such I can confirm that while the portion of this article dealing with the
political history and issues was fine, the opening personal part was quite
misleading.

If you have a $300 water/sewer bill you're doing something absurd. We're a
family of 6, and I am by no means conservative with my showers, wife takes a
bath every night, 4 kids bathing regularly, and our bill has never been more
than $100 for a month.

Having the sewer portion of the bill be the same as the water portion is bad,
and there's no doubt it's a screwed up situation, but this is a typical case
of a reporter seeking out outliers and presenting them as commonplace.

------
ck2
Didn't Alabama just export virtually all of it's migrant workers recently too?

Some crazy decisions going on there.

Let's see if people keep voting against themselves.

------
kamaal
This might be a cultural difference. I'm from India.

But 'poor' people have cars in America(From the photos)? You guys get $600 per
month for doing nothing(Social security)? Don't pay taxes and yet
infrastructure benefits must reach you?

I don't really know what more the country can do for you guys. I mean paying
individuals $600 per month for doing nothing, with which they can afford home,
cars, food and clothing all this when the individual isn't even working.

I mean if this isn't sufficient, what is?

You really must come out of US and check the definition of 'poor' in other
countries.

Here is a reason why you guys can never beat China. Because there people tend
to be happy with ever little they get. But here in this case you have people
complaining for stuff which is offered to them free at the first place.

P.S : I am software engineer here, who can barely afford a motorcycle and
fuel. Let alone a car.

~~~
mkr-hn
Social security is paid for by payroll taxes (making it closer to insurance
than a handout). And those cars are old and not worth much. You could buy one
after a few weeks of donating blood. Sewers and water are usually paid for by
a fee or taxes.

I could go and dispel more misconceptions for you, but I think you've read
enough to know that you have a few things wrong and will wisely avoid judging
the entirety of a nation's poor based on a single photograph.

ETA: Most poor people have cars because most poor neighborhoods don't have any
reasonably priced grocery store. It's cheaper to own a car (with all the
potential it brings) than to shop locally.

~~~
kamaal
I don't know much about America, but if you could afford a car by doing as
simple a thing you mentioned than my friend you are in heaven. You have no
clue how bad this part of the world is.

Just come to Mumbai or any urban metro in India and see for yourself how
people travel. Majority of them are herded like sheep in busy trains and
buses.

That is why I said, it might be just a cultural thing. Here too, we need to
pay for water and sewers.

But I understand that your barrier for entry when it comes to measuring
poverty is very different than ours. By your definition 95% of whole India may
fall into poverty.

~~~
mkr-hn
It's best not to assume people have no clue, even if it seems like they don't.
Because I _do_ have a clue. Many of them. I am laden with clues. I don't know
the transportation situation in most poor places here, but I doubt it's good
if people are choosing a car over a bus or train. I know the poorest places in
this suburban town are a mile or more from the grocery store across dangerous
roads, and the nearest mass transit option is 20 miles away.

~~~
kamaal
_I know the poorest places in this suburban town are a mile or more from the
grocery store across dangerous roads, and the nearest mass transit option is
20 miles away._

That doesn't even begin to describe poor according to my definitions of poor.

But I agree, we have different yard sticks to measuring what exactly poor is.

------
jamgraham
Larry Langford For Life!!
[http://www.bhamweekly.com/birmingham/article-1190-the-
life-a...](http://www.bhamweekly.com/birmingham/article-1190-the-life-and-
crimes-of-larry-langford.html)

------
qas1981
I suffered in Birmingham for almost 3yrs of my life. I realized the error in
my ways and moved. The closet thing to a real politician was forced out a few
years ago. Everyone else is bought

~~~
UrbanPat
What politician are you referring to?

And just for the record, I really like Birmingham. It's a good city. It has
had some really terrible politicians, but despite that, it's a really nice
place to live. (Though, I must confess, I don't have to pay a water bill).

------
leoh
Does this remind anyone else of "Brave New World?"

~~~
splat
It's admittedly been a while since I've read _Brave New World_ , but I don't
see the connection at all. Care to elaborate?

------
eibrahim
what a disgrace!!! the richest country in the world can't provide running
water to its citizens... what a shame!!!

~~~
Stormbringer
That was my initial reaction too. But then I saw that the real problem is that
they were gambling on derivatives to fund critical infrastructure projects.
The obvious solution is more bailouts. The libertarian solution would be to
let them 'stew in their own juices'. I suspect there is no 'right' answer
because the people who created this disaster. can never repay the money, even
if they wanted to.

~~~
ebiester
The problem is that the people making the bad decisions and the people
suffering for those decisions are not the same people.

~~~
tedunangst
The people suffering elected the people who made the bad decisions.

~~~
JamisonM
Of course the people they elected ran on detailed platform of how to use
derivatives to fund infrastructure projects and those voters are very familiar
with complex financial instruments!

~~~
tedunangst
I don't think it is asking too much to not elect people who will be bribed
into screwing you over. At the community level candidate integrity should
still be measurable. But the likely problem, given voter apathy, is not that
they elected the losers, but that they sat by and allowed them to be elected.

~~~
Stormbringer
I was in the UK when they had their lowedt voter turnout since World War 2. A
couple of months later 9/11 happened and Tony Blair was leading the country
into war. All of a sudden a lot of people who hadn't voted were saying "hang
on... we're not sure we want this muppet in charge during wartime".

The problem is that not all elections are equally important, and it is easy
for the voters to either (a) go to sleep at the wheel or (b) vote themselves
more pork.

