Detroit filed the largest municipal bankruptcy in US history today.
If approved by a federal judge, the bankruptcy would force the thousands of creditors that the city owes into negotiations with the city's Emergency Manager, Kevyn Orr to resolve almost $19 billion of municipal debt. On the
In anticipation of the filing, investors drove Detroit bonds and notes lower, giving them record high yields.
Detroit becomes largest US city to file for bankruptcy in historic 'low point'
From the article:
If approved by a federal judge, the bankruptcy would force the thousands of creditors that the city owes into negotiations with the city's Emergency Manager, Kevyn Orr to resolve almost $19 billion of municipal debt. On the
In anticipation of the filing, investors drove Detroit bonds and notes lower, giving them record high yields.
Detroit becomes largest US city to file for bankruptcy in historic 'low point'
From the article:
In a letter posted with the filing, the Michigan governor Richard Snyder confirmed he had received Orr's request to start the bankruptcy proceedings. He said it was "clear that the financial emergency in Detroit cannot be successfully addressed outside of such a filing, and it is the only reasonable alternative that is available."
Snyder said he hoped the bankruptcy would be the beginning of the end of Detroit's woes. "This decision comes in the wake of 60 years of decline in the city, a period in which reality was often ignored. I know that many will see this as a low point in the city's history. If so, I think it will also be the foundation of the city's future," he wrote.
The governor painted a picture of a city in collapse. Citizens wait 58 minutes for the police to respond to calls, compared to a national average of 11 minutes. Only a third of ambulances were in service in the first quarter of 2013. There are approximately 78,000 abandoned buildings in the city. The unemployment rate had nearly tripled since 2000 and the homicide rate was at its highest level in 40 years, he said. Detroit is unable to meet its most basic obligations to its residents, let alone its creditors.
"The citizens of Detroit need and deserve a clear road out of the cycle of ever-decreasing services," Snyder wrote.
Orr had set out a restructuring plan in June for the city, which has been plagued by corruption and plummeting revenues for years. But pension groups and bondholders balked at the terms. This week, pension funds objecting to Orr's plan sued to stop him from making the move.
What should happen? Should Washington bail out Detroit again? Should the city workers' pensions be taken? Should the creditors just get nothing back (and face bankruptcy themselves)? Should municipal services continue to be underfunded?Snyder said he hoped the bankruptcy would be the beginning of the end of Detroit's woes. "This decision comes in the wake of 60 years of decline in the city, a period in which reality was often ignored. I know that many will see this as a low point in the city's history. If so, I think it will also be the foundation of the city's future," he wrote.
The governor painted a picture of a city in collapse. Citizens wait 58 minutes for the police to respond to calls, compared to a national average of 11 minutes. Only a third of ambulances were in service in the first quarter of 2013. There are approximately 78,000 abandoned buildings in the city. The unemployment rate had nearly tripled since 2000 and the homicide rate was at its highest level in 40 years, he said. Detroit is unable to meet its most basic obligations to its residents, let alone its creditors.
"The citizens of Detroit need and deserve a clear road out of the cycle of ever-decreasing services," Snyder wrote.
Orr had set out a restructuring plan in June for the city, which has been plagued by corruption and plummeting revenues for years. But pension groups and bondholders balked at the terms. This week, pension funds objecting to Orr's plan sued to stop him from making the move.
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