san bernardino last night as you mentioned. it reflects an inability to pay liabilities and the liabilities come primarily in the form of pensions and past employees opposed to future employs. san bernardino, can't meet the payroll in mid-august and so declaring bankruptcy. there's a hair cutting of liabilities going forward to rectify the situation, as well as as i mentioned, you know, an injection of liquidity of the central bank that allows this transition to take place gradually opposed to suddenly like greece and spain. >> bill, on a different note here, i'm so disappointed you didn't read a 25-page document

when you look at san bernardino, reporting that 70% of homeowners in san bernardino are under water and owe more on their morgan their r than their home is worg. you have mismanagement of money in a number of these cities and questions about how the finances were handled there. professor, you say look, bankruptcies are the tip of an iceberg for what you call failing american cities. >> yeah. 95% of the cities in america are having trouble. bankruptcy is literally the tip. every major city because of the economy is having pressure now on wanes and on pensions. potholes being filled and schools and police and fire. the tragedy is you can't fix this problem locally. the only thing you can do is manage a shrinking pie. over the last decade our economy

what does china have to do with scranton and san bernardino? everything. we lost 6 million manufacturing jobs. we have 25 million people, poppy, in this country underemployed, not earning a descent wage and the reason why is we don't make stuff any more. we consume more than we make. and the tragedy of these cities is that they can't do anything. the only thing they can do is basically penalize people and

has the recovery come to san bernardino? >> no. >> reporter: patrick morris is the mayor. >> we have a host of our residents who are not working, not paying taxes, don't have disposable income so they're not shopping. that's a problem for us. >> reporter: tax revenues have plummeted and the city now has a $45 million budget hole. it has cash to pay city workers for just one more month. the city work force has already been slashed 20% and employees have been given... have given $10 million in salary and benefit concessions. the city wants to renegotiate its labor agreements. right now san bernardino expects to take in $120 million in revenue this year, but it pays out $126 million to workers and retirees, so before a single city service is performed, san bernardino is already $6 million in the red. the city attorney now says that in 13 of the past 16 years budget documents were falsified, masking the depth of the problems. the firefighters' union calls bankruptcy the easy way out. >> i interpret the bankruptcy as them protect

san bernardino or des moines, wherever it is, your services are going to be cut. your police and fire, schools, garbage collection, potholes. >> reporter: for now there will be no change in essential city services, san bernardino firemen battled brush fires earlier this week. but their pensions and police pensions and all city salaries will now be vigorously challenged. mike taibbi, nbc news, san bernardino. >>> frightening scene in columbus, ohio this morning when a freight train carrying ethanol derailed, exploded. one person living nearby said it looked like the sun had fallen to the ground. fire crews let it burn itself out, all they could do. some homes were evacuated. two people suffered minor injuries when it was over. >>> we've been reporting on the growing wave of debris in the pacific from last year's tsunami in japan. we have seen soccer balls and boats, a motorcycle, even a giant dock come on our shores. tonight we're being told it's just the start. there's a lot more out there. also tonight we want to take you with the scientists to see what that next

san bernardino county started this plan because a group of venture capitalist in san francisco got to got some money together at least i think like twenty five million dollars and went down to the c.e.o. of the county's name is gray devereaux and told him we have we have this magical plan to head to help your problems here seminole county isn't exactly a very wealthy county. they started meeting with him though back in october or november according to the county and you know they didn't tell me. i mean these are public officials or something in california that's called the brown act max and you know you if you're going to discuss a public issue like taking homes right through eminent domain then you have to do this publicly so they would have met with great devereaux he's not all liked official he was hired by the county and everything and they can kind of get away with doing that the problem is a great devereaux then goes and signs a confidentiality agreement with these investors he's v.c.s. up in northern california and they keep you know having their talks and figuring out their pl

when you look at san bernardino, reporting that 70% of homeowners in san bernardino are under water and owe more on their morgan their r than their home is worg. you have mismanagement of money in a number of these cities and questions about how the finances were handled there. professor, you say look, bankruptcies are the tip of an iceberg for what you call failing american cities. >> yeah. 95% of the cities in america are having trouble. bankruptcy is literally the tip. every major city because of the economy is having pressure now on wanes and on pensions. potholes being filled and schools and police and fire. the tragedy is you can't fix this problem locally. the only thing you can do is manage a shrinking pie. over the last decade our economy is growing at a third of the rate it did in five decades. a guy like ron the firefighter, he can't have a job unless you also have manufacturing jobs generating good wages and having that ripple through. >> here's the issue on top of that. that's a fact that there is a strong argument that those jobs and that growth that we saw that would expl

i don't think san bernardino. and get out. and leaving them accountable. this happens in 10 years. and we pick up the mess now and five years from now we strike nice agreement pensions and with the unions and we have the same problem again. how do we avoid that. >> maybe we do fire them. >> to victoria's point. in san bernardino they faked the number for 16 years and i see rick wacking his finger there. it sad for taxpayers. and now they have a look out and bond rates go up for them. >> problem with bankruptcy it makes it difficult for them to save money. what scott walker did in wisconsin. he said look. we can't give free health care and pensions forever. he with on stood the roller and that's the way they will have to go. >> thanks, gang. >> with the president making a pitch to voters. they are making their own pitch for across the board spending cuts. carbin in on that one. >> and this guy handlingarps trade treaties for this guy. oh, my god. that's next . people like options. when you take geico, you can call them anytime you feel like saving money. it

this city is san bernardino. population 210,000. one of the largest cities to approve a bankruptcy filing. after finding himself more itself more than $45 million in the hole. it is joining two other california cities in recent weeks, mammoth lakes and stockton. as if they find themselves unable to pay their bills. trace gallagher is live from l.a. with a very latest. boater we are talking about a surgery with nearly 1012% unemployment. the third-highest foreclosure rate in the country and now we learn that the accountants in san bernardino who have been cooking the books for 13 years, spreading out the losses. the city of san bernardino is so broke that i cannot make payroll after august 15, which means that police, firefighters, trash collectors and other city services would likely stop working. here's the reaction after last night's vote. listen. >> i've been here all my life, and to see this. thirteen years we've been lied to. reporter: so green to chapter nine bankruptcy, the city can stop paying creditors and use the courts to

, you think it's a san bernardino problem. got to get our manufacturing jobs back. i want to hear obama, i want to hear romney talk about how we get the jobs back in scranton and san bernardino. >> the manufacturing loss is in the millions in the last decade. all that's not coming back. >> why do you say that those jobs aren't coming back? the problem we have is -- >> because i talked to the heads of big, big companies, general electric and others that have brought some of those jobs back here, but a lot of them aren't coming back, and steve jobs says the same thing with apple. >> general electric is a big part of the problem, they offshore to china, they make a bunch of money over there and they take their jobs out of skinecta skinectady, and they tell you that we can never give them back. >> professor, i want to give gary the last word. gary go ahead, i just want to preface it by saying it's interesting that the "l.a. times," the mayor -- it was a bad idea, didn't cut their costs significantly and he said it hurt their reput

en el condado de san bernardino se tiene un plan para ayudar a personas que se compraron casas que seo de san bernardino california, contemple una polÉmica acciÓn de rescate hipotecario. la expropiaciÓn de hipotecas de casas devaluadas en el debate inmobiliario y los dueÑos estÁn al corriente de sus pagos. >>> tomando en consideraciÓn que la expropiaciÓn debe ser para el bien de la comunidad y el hecho de que tengamos propiedades que valen menos que lo que se debe y quitar ese sobre endeudamiento. es para el bien comÚn. por lo tanto trae una consecuencia favorable. >>> con el plan san bernardino y las ciudades de ante rÍo california, buscan poner un alto a la desef luego de propiedades, debido al abandono de centenares de casas embargadas y prop ten pagar una indemnizaciÓn justa a los inversionistas dueÑos de las hipote hipoteca sacro r expropiadas. >>> hay 4 veces mÁs embargos hipotecarios, que en cualquier otra parte del paÍs. >>> y el precio de las casas cayÓ de # 50 mil dolares hace 5 aÑos a solo 150 mil. en este aÑo. >>> si compras una propiedad que te costÓ 350 mil dolares como

san bernardino last night as you mentioned. it reflects an inability to pay liabilities and the liabilities come primarily in the form of pensions and past employees opposed to future employs. san bernardino, can't meet the payroll in mid-august and so declaring bankruptcy. there's a hair cutting of liabilities going forward to rectify the situation, as well as as i mentioned, you know, an injection of liquidity of the central bank that allows this transition to take place gradually opposed to suddenly like greece and spain. >> bill, on a different note here, i'm so disappointed you didn't read a 25-page document in the 3:30 we gave you but as i'm going through here, i don't know if this is a new comment. even if it's not new, comment on it. it says one participant expressed concern of protracted term of monetary policy of a build-up of risks in the financial system. i know you have been all over that theme for a while. obviously, libor-gate going on. we saw what happened with jpmorgan chase. do you feel there's other big banks

san bernardino is more than $45 million in the red.t is now the second largest united states city ever to go belly up. the largest stockton which filed for bankruptcy just a short time ago along with much smaller mammoth lakes. san bernardino troubles started during the housing market crash but now there are claims that past administrations cooked the city's books for more than a decade. claudia cowen with the news in the bay area newsroom this afternoon. and i understand this is really blindsided a lot of people. >> even though the city's financial tailspin was years in the making last night's city council vote caught many people off-guard. san bernardino is so break it may not be able to make payroll this summer. this amid allegations by the city attorney that budget oil fibs falsified documents to mask the losss. >> it has been run 13 years we have been lied to. wow. >> they had no choice but to vote the way they did and the reorganization will probably help, you know. they have no other avenue. >> by law, cities must go through a m

if you're in san bernardino, you think it's a san bernardino problem. across america, our cities are dying and our cities are dying because our economy is dying. i want to hear obama, i want to hear romney talking about how to get our manufacturing back to scranton, back to san bernardino and everywhere in between. reality is the manufacturing jobs that this country has lost is in the millions if you look at the last decade alone. a lot of those aren't coming back and -- >> why do us that, poppy? why do us those jobs aren't coming back? >> because i talked to the heads of the big, big companies. general electric and others that have brought some of those jobs back here, but a lot of them aren't coming back. steve jobs said the same thing with apple. >> this isn't something you can fix overnight. >> general electric is one of the biggest parts of the problem here. they offshore to china. they make a bunch of money over there and the take their jobs out of schenectady they tell you we can never give them back. >> professor, i want to give gary the last wo

. >>> the southern california city of san bernardino is filing for bankruptcy. "the los angeles times" says city council voted and passed the issue last night. the interim city manager said the city may not be able to make payroll with a budget shortfall of more than $45 million in the next fiscal year. san bernardino is now the third california city in less than two weeks to make the rare move. >>> the city of scranton, pennsylvania, facing a severe budget crisis as well. right now officials say the city has roughly $5,000 left in its coffers to try to cut costs. the mayor has cut nearly 400 city workers pay to minimum wage. he says the city council is to blame for the cash shortage. he claims they passed a budget that borrowed a large sum of money from banks without figuring out how to pay it back. >> they deserve to be paid. they're doing great job. no question about that. i can't make it work if i don't have all of the money. >> unions representing some of the workers are planning to file a federal lawsuit against the mayor. >>> chevrolet hopes to boost car

san bernardino is in the hole.t's warning its workers it might not be able to make its payroll in the next three months. on june 28th, stockton, california, was the biggest u.s. city to declare bankruptcy. last week, mammoth lakes, california, went chapter 9. all facing the housing bust, mounting revenues and debt. >>> and hard times are getting harder in scranton, pennsylvania, with a fierce battle between the city and its workers. the mayor declined a court record and forced employees to $7.25 an hour. that's the minimum wage. >> the reality is, because council underfunded their budget, we don't have money. we have enough money to pay minimum wage. >> reporter: but angry union members say they can't live like this. >> most members i talked to, because they live paycheck to paycheck, i might have savings to go on a vacation right now and make sure that the bills get paid. but after a couple weeks, i'm going to be in some real financial hardship here. >> reporter: no one know where's the money will come from. scran

if you are in san bernardino deen why, you think it is a san bernardino problem.s are dying because our economy is dying and our economy is dying because we don't make stuff any more. we have to get our manufacturing jobs back. that's why we have presidential elections. i want it hear romney and obama talk about getting manufacturing back to scranton, san bernardino and everywhere in between. >> the country has lost jobs in the millions, if you look in the last decade alone. >> why do you say that, poppy? ? >> why do you say those jobs aren't coming back some. >> because i talked to the heads of the big, big companies, general electric and others, that brought some of the jobs back here. but a lot of them aren't coming back, steve jobs said the same thing with apple. >> this is not going to be fix overnight. this is not something you can fix overnight. you can't make jobs -- >> guys -- >> off-shore, off-shore and china. they make a bunch of money over there and take their jobs out of schenectady and they tell you that we can never get them back. >> professor, i wa

this time it's san bernardino. they ran out of money when they were trying to pay their bills like so many cities around this country. san bernardino, $45 million in the hole. the city of 210,000 people is among the largest in the nation ever to declare bankruptcy. it becomes california's third city in just weeks to go broke. where is all this going to end in california? folks are not happy there. >> another city in california is going down. reorganization, whatever you say, it is bankruptcy. credit rate run down. contracts wide open. everything is open now. martha: boy, a depressing situation. charles payne of the fox business network joins me. chars, what do you make of it and how many more dominoes to fall in this game? >> one thing for sure, martha, more dominos will fall. what is interesting about san bernardino they actually made some concessions over the last few years. they cut their public workforce. they even had some cityy worker concession, salary concessions. so i think one of the underlying stories he

did san bernardino get any of it? >> they were in the news over that. out they got nearly $4 million. but they didn't spend it all right away. so they got into the scuffle with the state of california, with the state trying to take it back because they weren't spending it quickly enough. you know, that money would not solve the problem. the other thing that came out today -- and you should watch this. i am wonder figure there will be potential criminal penalties on this. the city attorney is saying that for 15 years or so, that city officials in san bernardino have been falsifying the financial records. so the books have been in bad shape for quite a while. now they are saying that they have been covering and it's been going on for a long time. >> greta: do you have any idea why they didn't spend the $4 million? it wasn't wise or targeted for something they didn't need? or they just didn't know how it handle their finances? >> what they said was that they were a bureaucratic holdup and they planned to spend it. but again, it would not get them out of th

san bernardino, stockton and my hometown mammoth lakes. there will be more in the next several months and years to come. megyn: it would be great if you could just think i'm getting a percent or 10% interest every year. but who is managing that other than the bernie madoff returns? >> that's exactly right. the biggest problem is they are basing this long-term. they are projecting out 15 or 20 years like in san bernardino, saying that we are going to get a percent every year. you nailed that down to three or 4% for those 15 years and the numbers we just showed you go up ex- potentially, and that is what is happening across the board. megyn: why not say you're going to get a 20% return every year? as long as we are in fantasy fantasyland, why not go with it? thank you. meantime in scranton, pennsylvania, another city almost broke and hard to meet pension promises. some are fighting the mayor's decision to/workers wages down to minimum wage in the city. $7.25 an hour. democratic worker chris dority/his own paycheck to the federal minimum as w

se estima que en 6 meses mÁs de 3 millones y medios de casa serÁn embargadas, oquigaron que en san bernardino pagos. >>> la expropiaciÓn debe ser para el bien de la comunidad. y el hecho que tengamos propiedades que vale menos de lo que se debe, y quitar el sobreendeudamiento es para el bien comÚn. >>> con el plan de bernardino, buscan poner un alto para la devaluaciÓn de propiedades, por el cennenar de casas embargadas, prometen una inversiÓn justa a los inversionistas. >>> son compaÑÍa de pensiones. >>> en san bernardino, hay 4 veces mÁs embargos hipotecarios que en cualquier otra parte del paÍs, el precio de casas cayÓ de 350 mil dÓlares a 150 mil en este aÑo. >>> si compraste una propiedad que costÓ 350 mil dolares, y hoy vale 150 mil, no tiene sentido financiero que la mantengas, sÉ que es una casa, sÉ que es esto, velo como un negocio malo. >>> el plan requiere de la materializaciÓn de prestamos frescos, para cubrir las hipotecas. >>> para que vuelvan a dar dinero a una persona, tengo el riesgo que maÑana el gobierno le me la quite, en lugar de financiarra al 3 o 4%, la financio al 6 o

san bernardino face as $45 million budget gap because of increasing employee cost. mammoth lakes lakes lakes and stockton also filed bankruptcy. >> why democrats say it feels like ground-hog day. >> this is the 31 time republicans tried to repeal all or part of the health reform law. >> reporter: a cartoon on the house floor mocking republicans for calls the law's penalty the biggest tax increase in history. >> you will see the woman got into her car, she didn't put her seatbelt on it was a choice, right? she is now being fined, but she says no, it is the biggest tax increase in history. that is what is going on here today. >>> the republicans are seizing on the argument and say the law will create more government agencies and a bigger bureaucracies. >> we have new agencies created by this. >> reporter: a handful of democrats indicated they will be switching sides and voting with republicans today. ktvu channel 2 news. >>> san francisco supervisors are not interested in trying a controversy crime plan, the stop and frisk policy. that program allows police to stop an

. >> san bernardino is the third california city to declare bankruptcy in the past month. it is facing a $345 million deficit. last night the city council voted to offer chapter 9 bankruptcy protection from creditors. there is growing list of cities in other states. here is more. >> reporter: predicted for years the day of reckoning has arrived. san bernardino, home to 210,000 residents they can no longer pay its bills of them declared bankruptcy in the past two weeks the third city. >> to file a chapter 9 petitioned on behalf of the city in the united states bankruptcy court. >> scranton, pennsylvania mayor is cutting his salary along with municipal worker to 7.25 an hour. >> the reality is because council underfunded their budget. we don't have enough money to pay minimum wage. if more money comes in we'll be happy to make those payments. >> the department of public works workers along with police and firefighters are preparing for the worst. >> so after a couple weeks, i'm going to be real financial hardship. >> city of detroit is on the brink of insolvency and the larg

this is happening across the country. >> san bernardino is one of the cities we talked about the other day with rick scott was on -- you know, he turned down the high-speed rail money from the federal government and they didn't. jerry brown is going ahead full force in one of the cities we said, you know, indio near palm springs and san bernardino, there may be a time when someone wants to go between those two cities. what if you go and you don't have high-speed rail to get there. california will take care of that and make sure -- every city should have a monorail. every city. have you seen the simpsons? sam is coming to town from the administrati administration, sam huckster -- >> i would like to take a monorail here every day. >> it's around the city. it's not here. every city needs a monorail. you have to have a raised -- what is it, a bond issuance and raise the money so you can -- >> the jefferson county thing is amazing. they squandered $2 billion and then they go in, double down, borrow even more. >> did stockton every take money? >> i don't know. >> i don't know what happened w

san bernardino will probably not be the last city in california to make that tough choice.o, who is next? cnbc jane wells joins me life this afternoon. jane, first of all, what's the impact on city services after a city like san bernardino with its size declares bankruptcy? >> well, none right away, although the police chief here this morning was saying he doesn't think he's such enlie staffed and more cuts will come down the road. but they are trying to reassure people by going into bankruptcy, city services won't be impacted except down the road there will be those reductions. we have to see what happens. here it is, the headline, on the brink and the heat from what's happening here is spreading all up and down this state like a brush fire. other places are asking can it happen here? l.a. county, for example, want its financial practices, has ordered a review to make sure they are not like stockton which already filed for chapter 9. auditors in the city of compton have quit and refused to sign financial records. oakland is pricing a $211 bond to cover pennsylvania obligat

can you talk about what's unique to california that could allow for more san bernardinos? >> part of it is they allow bankruptcy. half of the states allow cities to declare bankruptcy. the other problem in california and a lot of this gets back to proposition 13, which limits property taxes, is cities don't necessarily have that much control over their taxes. so as the state got into trouble, they actually start playing gapes a ining games and different revenue sources. as cities get into trouble, they don't have as many options to try to get out of trouble and they need voter approval to pass any new taxes. so it's kind of a california specific set of problems in that they don't control their revenues. they actually have pretty high expenditure costs in part because of labor contracts and it's not really clear when the housing bubble burst how they were going to make up that money that they no longer had. >> s.e., i know you care a lot about privatization of american cities. i think part of what's going on is america is economically exhausted from years of fighting multip

they also say that if you live in a town like san bernardino we will make it really difficult for youget mortgages in the future and that was lieutenant governor gavin newsom was warning about, he said don't come in and make it difficult for everyone in the town, let's see if we can make it work because it is an unprecedented crisis. >> interesting endorsements this week >> this week and the california democratic party met to come up with their endorsements for the november ballot. they have endorsed government brown's measure and they will oppose a measure by molly maunder to fund education through an income tax and that is very interesting. it will be a long time before you see democrats opposing a tax increase to benefit education. an interesting move by the party. >> you can find more of melissa's segments on cbssf.com. >> two technology giants will square off in federal court over the iphone and the ipad. samsung and apple accusing one another of stealing secrets. here to talk about that in your monday morning in business is jason brooks >> this is a big one between apple and sam

this week, san bernardino became the second largest city in u.s. history to declare bankruptcy. the city attorney says that the council had been given falsified financial statements and has other evidence of financial mismanagement. >>> and hackers have leaked about 450,000 yahoo users' e-mail addresses and passwords. the hacker group claimed responsibility and says it stole the information to give yahoo's security managers a wake-up call. yahoo says only 5% of the passwords were still valid. duarte? >>> ashley morrison here in new york. thanks, ashley. >>> coming up in the morning news, drought dilemma, scorching heat in t midwest is putting a strain on corn crops as farmers wait for rain. this is the "cbs morning news." "moneywatch" sponsored by vagisil. count on it. "moneywatch" sponsored by vaj sill. count on it. ♪ want my recipe for healthier hair color? natural instincts! formulated with aloe, vitamin and antioxidants natural instincts has a system that's a healthier way to radiant color. indulge... with natural instincts. less guilt, more gorgeous. here at the hutchison h