Detroit Files for Bankruptcy

Fuzzy_

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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:
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?
 
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Penis Aficionado

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I have no idea, what Detroit should do, but over the years I've known quite a few people from Michigan. They all have one thing in common: They are absolutely terrified of Detroit. They never, ever go there. If I ask them anything about Detroit, they just say: Stay away.

Once I found myself stranded for the night when I missed a connecting flight in the Detroit Airport. At the nearby airport hotel, I asked the bartender (a girl in her early 20s) for recommendations on things to do if I took a cab into Detroit proper. She practically begged me not to do it, and poured me a free shot of whiskey to convince me to stay in the safety of the hotel. I pressed her a bit, and she said she honestly didn't know what to do in Detroit -- she was from the suburbs and never went there. She just knew it was dangerous.

I've still never been to Detroit, and though I can't help but think all these people are overreacting to urban legends, it strikes me that no financial restructuring will help Detroit until people who know it stop speaking as if it were Mordor.
 

Fuzzy_

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Meanwhile, large cities in conservative Texas continue to prosper. Just sayin'

Well, since you went there...

The richest states, with the highest personal incomes, are mostly liberal and the poorest are mostly conservative. Just sayin'.

While we're at it, blue states tend to have fewer teen pregnancies and drunk driving fatalities, lower obesity rates, and contribute more through income tax. Also, the super rich prefer to live in blue states.

In other words, the blue states are financially carrying the red states -- including paying for the federal government that defends their right to bitch about the 'commie' blue states. :rolleyes:

Not only that, most of the southern red states owe so much money to the federal government that they couldn't secede even if they wanted to.

The following lists are the 10 richest and 10 poorest states based on median household income according to Wikipedia. Democrat states are colored blue.

10 Richest States:

1 Maryland
2 Alaska
3 New Jersey
4. Connecticut & District of Columbia (tied)
5 Massachusetts
6 New Hampshire
7 Virginia
8 Hawaii
9 Delaware
10 California


10 Poorest States:

1 Mississippi
2 West Virginia
3 Arkansas
4 Kentucky
5 Alabama
6 Tennessee
7 Louisiana
8 New Mexico
9 South Carolina
10 Oklahoma


Aside from racial or "heterogeneity" arguments, can anyone explain this consistent pattern?

So, all the southerners who might be complaining about bailing out a northern city... your probably not.
 
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b.c.

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One of points made in this evenings news (NBC Nightly News) was the tremendous drop in Detroit's population. I don't recall the exact numbers but seems it's currently less than half of what it once was. I suspect that, and changes in the auto industry may have contributed to some of their financial woes.
 

vince

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America could have fixed it's cities with what it cost to ruin Iraq.
 

vince

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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?

What should happen? I think Florida should round up all your giant house eating snails and ship them to Detroit Fuzzy. They will eat the detritus down to a manageable size.
 

Fuzzy_

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What should happen? I think Florida should round up all your giant house eating snails and ship them to Detroit Fuzzy. They will eat the detritus down to a manageable size.

Capital idea! And then sell the tons of snail poop... after the 10% skimming for bribes, kickbacks, waste, theft and payoffs.

The city just isn't working and has been declining for decades because no effective changes have been made.

Fuzzy's naive, simple, idealistic idea:

Washington gives them $25 billion. No loans, and no gifts that only barely keep the city sustained on artificial life support. It's time to finally act and deal with the decades-long downward trend. The $25 billion would pay off their debts and allow for a newly-restructured government to re-brand and market itself to businesses, immigrants and tourists.

The restructuring would be handled by non-interested experts from outside of the city to prevent corruption and special interests. After a few years, they hand the responsibility back to the smaller, newly-restructured municipal government.

On the downside, other cities might see this as an excuse to be less responsible with their funds, knowing they'd be bailed out too. Also, if Detroit doesn't get any new industry, their fancy new city will be unfunded, starting the chain again.

It's not just a city, it's Motown. It's a symbol of American ingenuity, affluence, and phenomenal 20th-centruy growth. It helped create the empire that the US is today. Should it be left to die?
 
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Discovery

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Well, since you went there...

The richest states, with the highest personal incomes, are mostly liberal and the poorest are mostly conservative. Just sayin'.

While we're at it, blue states tend to have fewer teen pregnancies and drunk driving fatalities, lower obesity rates, and contribute more through income tax. Also, the super rich prefer to live in blue states.

In other words, the blue states are financially carrying the red states -- including paying for the federal government that defends their right to bitch about the 'commie' blue states. :rolleyes:

Not only that, most of the southern red states owe so much money to the federal government that they couldn't secede even if they wanted to.

The following lists are the 10 richest and 10 poorest states based on median household income according to Wikipedia. Democrat states are colored blue.

10 Richest States:

1 Maryland
2 Alaska
3 New Jersey
4. Connecticut & District of Columbia (tied)
5 Massachusetts
6 New Hampshire
7 Virginia
8 Hawaii
9 Delaware
10 California


10 Poorest States:

1 Mississippi
2 West Virginia
3 Arkansas
4 Kentucky
5 Alabama
6 Tennessee
7 Louisiana
8 New Mexico
9 South Carolina
10 Oklahoma


Aside from racial or "heterogeneity" arguments, can anyone explain this consistent pattern?

So, all the southerners who might be complaining about bailing out a northern city... your probably not.

WELL SAID and very true!
 

redneckgymrat

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Fuzzy's naive, simple, idealistic idea:

Washington gives them $25 billion. No loans, and no gifts that only barely keep the city sustained on artificial life support. It's time to finally act and deal with the decades-long downward trend. The $25 billion would pay off their debts and allow for a newly-restructured government to re-brand and market itself to businesses, immigrants and tourists.

The restructuring would be handled by non-interested experts from outside of the city to prevent corruption and special interests. After a few years, they hand the responsibility back to the smaller, newly-restructured municipal government.

...

Should it be left to die?

Fuzzy, let me ask you a fundamental question. Detroit *was* the center of the US automobile industry. It *was* a major hub of manufacturing and industry. It *was* serving a purpose.

Does it still serve a purpose?

On a fundamental level, does it make sense to pour money into a city which seems to no longer serve a productive purpose? I'm genuinely asking.

If so, then rescuing it makes sense. If not, then why *not* let it die?
 

Penis Aficionado

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The idea that it's going to "die," regardless of what the federal government does, seems preposterous to me.

First of all, has a city anywhere close to the size and importance of Detroit ever "died" in the history of this country?

Second of all, cities spring up where they do for reasons. Half an hour outside of Detroit, the countryside is absolutely beautiful. It's on the edge of a major body of water. Historically and culturally, it's certainly one of the 10 most important cities in the country. It's full of old, majestic architecture. It's an hour away from one of the country's largest and best public universities. And -- this makes no sense to me, but it's true -- you can buy a house in Detroit for under $10,000.

People used to think Brooklyn, NY was an absolute shithole -- it was violent, poverty-ridden and corrupt. Now it's the hipster/artist/foodie capital of the United States. No reason the same thing won't happen in Detroit.
 
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Jason

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Europe now has lots of experience of national bankruptcy and a number of different approaches, all of them bad. The starting point for America is to accept that there is no right solution for Detroit, just some solutions that are less bad than others.

1) Doing nothing is not an option. Leaving aside the human cost, the economic cost is that contagion will spread very quickly to other cities and states with big debts as investors pull their money out of these.

2) The simplest solution is to convert the debt into federal debt, a bail out. This will substantially reduce Detroit's borrowing costs. It may be necessary to put in place some emergency measures for setting a Detroit budget, for example to stop Detroit going on a spending spree with the cheap money they can now access. There is of course moral hazard in this (if Detroit gets away with it other cities might as well go bankrupt). A decision must be taken as to whether Detroit can afford even low interest on its debts or whether they really are unsupportable.

3) The Cyprus solution. This is the impossible solution that has become possible in a first world democracy - even with every single member of their government voting against it. The debt is funded by a levy on both private and commercial bank deposits held by individuals and businesses in Detroit. In the case of Cyprus the levy is 60%. The unthinkable has happened. Variations of this would include taking Detroit pension funds.

4) The USA gives the full value of the debt to Detroit, plus as much again for investment to get the city moving again. Curiously this is probably the cheapest solution. It does of course reward bad government.

Any sort of long-term external governance for Detroit breaches democracy and is a form of economic colonisation. The USA is in a bind where it needs sensible policies for Detroit but it needs people to vote for these.
 

MichiganRico

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Washington gives them $25 billion. No loans, and no gifts that only barely keep the city sustained on artificial life support. It's time to finally act and deal with the decades-long downward trend. The $25 billion would pay off their debts and allow for a newly-restructured government to re-brand and market itself to businesses, immigrants and tourists.

The restructuring would be handled by non-interested experts from outside of the city to prevent corruption and special interests. After a few years, they hand the responsibility back to the smaller, newly-restructured municipal government.

On the downside, other cities might see this as an excuse to be less responsible with their funds, knowing they'd be bailed out too. Also, if Detroit doesn't get any new industry, their fancy new city will be unfunded, starting the chain again.


Rewarding an incompetent, corrupt municipal government with any type of financial bailout is counter-productive and will almost certainly lead to other municipalities following suit. Twenty plus years of gross financial mismanagement can not be ignored. Detroit's failure to downsize its government to comport to revenues and declining demographics is epic. Detroit politicians continued to make promises the city could not possibly fund, without massive borrowing, because they did not want to make the hard and unpopular decisions required--thus jeopardizing their own political careers.

Chapter 9 Federal bankruptcy was the only viable option left for Detroit. The same politicians who destroyed Detroit's financial viability are the same ones who screamed and hollered the loudest about loss of "local control" when Kevyn Orr was appointed by the Governor to the role of Emergency Manager--making the decisions which were once of the province of the Mayor and City Council. They will be the same ones who continue to scream and holler after cuts are ordered by the Federal bankruptcy judge. They'll talk about the unfairness of the whole process and how Detroiters are being victimized. And these will be many of same people who will run for elected office once again after managerial control of the City returns to elected government.

Regrettably, many bondholders, current and former municipal employees, and persons who work in Detroit and Detroit citizens themselves will be making large sacrifices to enable Detroit to return to a more stable footing. Michigan state government and the Feds do have a vital role in all this--not with bailout money--but to provide the necessary support funding for urban renewal projects and to help create a jobs infrastructure which will attract new business and commerce to the City. Chronic unemployment issues have undermined Detroit's finances and led to increasing levels of crime and flight from the City. These must all be addressed if Detroit is once again to regain its prominence among American cities.
 

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MichiganRico.....spot on with that assessment!

I'm also against any Washington bailout. With the dysfunctional Detroit city council blaming all their problems on others, this bankruptcy was the only possible outcome. Even Kevin Orr, the emergency manager, couldn't pull the miracle 9th inning comeback rally that many were hoping for.

The exodus from Detroit started in the late 60's following the '67 race riots. That's when, as a youngster, my family moved out to the burbs. Then in the 70's, with Mayor Coleman A Young basically telling the unhappy white residents to move north of 8 mile......that sealed the deal on getting the hell out of Detroit for the rest. After that, it was pretty much an us vs them attitude (Detroit vs burbs, Lansing, and outstate). I've no hope for Detroit returning to a vibrant and growing city. Rather, I hope they can return to at least being a city that provides basic services to it's residents :frown1:
 

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One of points made in this evenings news (NBC Nightly News) was the tremendous drop in Detroit's population. I don't recall the exact numbers but seems it's currently less than half of what it once was. I suspect that, and changes in the auto industry may have contributed to some of their financial woes.
Detroit had its high in the 1950th, with 2 million. Since then, they lost 50%, or 1 million people. Doring the last 10 years 250.000 and by this a massive increase, compared with the previous 50 years
 

Dakota Kid

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Detroit had its high in the 1950th, with 2 million. Since then, they lost 50%, or 1 million people. Doring the last 10 years 250.000 and by this a massive increase, compared with the previous 50 years
Detroit's current population is 700k and still shrinking.
 

bar4doug

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Detroit had its high in the 1950th, with 2 million. Since then, they lost 50%, or 1 million people. Doring the last 10 years 250.000 and by this a massive increase, compared with the previous 50 years

Indeed. At the peak of US Industrial Power. At the end of the Second World War, the US came out unscached (sans Pearl and the Alluetian Islands). Europe was bombed out. Japan was nuked. China had yet to enter the industrial age, and third world countries were unheard of. The US machine was humming.

Promises and benefits for a better tomorrow were made assuming that the position of the US would not change, and there would be no competition. The decline began in the 60's, accelerated in the 70's, and saw some rebounds with new technology in the 80's and 90's, but for cities whose economies were based on raw manufacturing, the last 50 years have been dreadful. The rest of the world has caught up, found better ways, and can do things better (cheaper) than we. But our obligations for those promises and benefits still continue.

I read that more than half of Detroit's revenue goes to underfunded pension funds. I hate to write it, but unless that changes, there is no hope for the city. If courts mandate that obligations be made, any bailout will bring on the same result in time. If taxes must be raised to fund pensions, jobs will be created elsewhere, people will flee. People follow jobs. Those unable to leave are forced to make do with what little is left. With no jobs, tax revenue declines, but obligations made in the past continue. Eventually you no longer have anything to offer the pawn broker.

What is happening in Detroit will begin to happen elsewhere unless municipalities reign in spending, tie it directly to revenue, and stop spending when revenue doesn't meet obligations. And that means cutting un-fundable obligations going forward.
 

cruztbone

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cities in Texas prosperin', lurker ? really? what about WEST, Texas? another example of what happens when you ignore OSHA and EPA regulations.
if that is what you call prosperin', then i suggest you get a new dictionary. what a pathetic response.
and never mind that Texas puts more people to do than anywhere else except Iran and Russia. what great company to be in.
or that Texas prides itself on the most children in poverty in the US of ANY state. is that prosperin'?
go read the facts online and get a grip on economic reality and NOT your penis.

as to Detroit, bankruptcy will probably help. the city has shrunk to less than half its size in 1960, with an ever smaller tax base. Detroit has more closed public buildings and schools than anywhere else in the nation. YES, it needs help. i will email the TESLA auto company and ask them to open a plant in Detroit. they certainly are bringing money to CA. and they dont use any TEXASS oil to run their cars either.

CA has had two middle size cities declare bankruptcy in the last five years: Vallejo and Stockton. both are slowly recovering with the help of the State of CA, which is now in the black due to the passage of PROP 30, which raised the tax rate of the wealthy by one half of one percent. thank you Democratic Governor Jerry Brown. both cities are still loaded with foreclosed homes. if you want to get an inexpensive home in CA , check out these two cities.