Detroit Is Largest US City to Go Bankrupt
After years of the recession, Detroit has finally succumbed to financial difficulties.The recession was the last straw. Detroit was in obvious trouble when I moved here from California 24 years ago and has been declining for 45 years.
As for the video itself, at least it mentiioned the possibility of Detroit as the "Greenest City." That's a trend I've been cheerleading, most recently in HOUR Detroit displays its green thumb. I hope that national media does more to pick up on that story.
Follow over the jump for the print media reaction.
I turn next to the New York Times, Billions in Debt, Detroit Tumbles Into Insolvency. The first page of the article repeats what the other sources I've embedded. In contrast, the second page shows why Detroit's bankruptcy matters to the rest of the country.
The municipal bond market will be paying particular attention to Detroit because of what it may mean for investing in general obligation bonds. In recent weeks, as Detroit officials have proposed paying off small fractions of what the city owes, they have indicated they intend to treat investors holding general obligation bonds as having no higher priority for payment than, for instance, city workers — a notion that conflicts with the conventions of the market, where general obligation bonds have been seen as among the safest investments and all but certain to be paid in full.As I've written before, the solutions devised here will be exported, including the bad ones. Detroit's bankruptcy may just be one of those bad solutions.
Leaders of public sector unions and municipal retirees around the nation will be focused on whether Detroit is permitted to slash pension benefits, despite a provision in the State Constitution that union leaders say bars such cuts.
Officials in other financially troubled cities may feel encouraged to follow Detroit’s path, some experts say. A rush of municipal bankruptcies appears unlikely, though, and leaders of other cities will want to see how this case turns out, particularly when it comes to pension and retiree health care costs, said Karol K. Denniston, a bankruptcy lawyer with Schiff Hardin who is advising a taxpayer group that came together in Stockton after its bankruptcy.
“If you end up with precedent that allows the restructuring of retirement benefits in bankruptcy court, that will make it an attractive option for cities,” Ms. Denniston said. “Detroit is going to be a huge test kitchen.”
While there are lots of haters in the N.Y. Times comments, reading them counts against the ten free articles a month a non-subscriber is allowed to read. On other hand, the New York Magazine blog entry, Detroit Is Bankrupt, which refers to the N.Y. Times article and also links to the actual court filing and a Vimeo video, is free. At least one doesn't have to pay to be aggravated. Also, the comments tend to be wittier, if not less hostile.
I'll give The Wall Street Journal the last word from Say It Out Loud: Detroit! This piece compares and contrasts Detroit's history and problems with those of GM's. It's also more optimistic about the city's prospects than I expected, although that's not saying much. At least the piece has a strong opening...
Say it out loud: Detroit!...and closing.
That’s all you have to do. Detroit. The Motor City. The Arsenal of Democracy. Motown. Techno. Detroit Rock City. “Imported from Detroit.” The city that put the world on wheels. The city that built the American middle class. Muscle cars. Marvin Gaye. Jack White. Kid Rock. Like a Rock. The D. Eight Mile. Miguel Cabrera.
This is a city with serious brand power, even if right now it has little else.
There are hopeful signs. A diverse collection of young entrepreneurs, as well as some big investors such as Quicken Loans chief Dan Gilbert, are bringing life to some downtown neighborhoods Whole Foods Market Inc. WFM -0.52% saw enough potential to open a store in the Midtown neighborhood near Wayne State University. The challenge will be spreading prosperity beyond the hipster enclaves.I couldn't have said it better myself.
Still, not for nothing is the city’s motto: “Speramus meliora; resurget cineribus,” or, “We hope for better things; it will arise from the ashes.”