Obama promised he wouldn't let Detroit fail... well yesterday it failed
Detroit files for bankruptcy.
Detroit filed bankruptcy Thursday, hopefully ending a long, terminal slide into insolvency. The city has been long beset by lost jobs, urban decay, and massive liabilities for public employees. Despite the inherent problems, Obama pledged to keep Detroit afloat. Today, that pledge failed.
The slid into bankruptcy has been a long one, with Obama pledging in 2012 that he would not allow Detroit to go bankrupt. That promise apparently only applied to the auto industry.
The city faces more than $18 billion in debt, accrued over years of lost jobs, high public wages and benefits, and urban blight. The city has the highest murder rate in over 40 years, and at least 78,000 abandoned buildings. Some areas are almost entirely deserted.
Creditors are understandably upset at the decision. It is very possible that municipal bonds could be affected by the filing, which the possibility alone makes the national municipal bond market weaker. After all, if Detroit can reduce its bond obligations, then so might other cities in financial troubles.
This could in turn, lead to higher borrowing rates for distressed cities, pushing some cities over the edge.
Other creditors, such as the public pension fund will also be drawn into the fight. Public pensions have been called out as one of the major burdens affecting the city.
The details of the bankruptcy filing remains secret, but it is expected that the city will try to work out individual deals with creditors that are willing to negotiate.
"There were no other viable alternatives," Snyder told reporters during a press conference when he authorized the filing.
City officials say they hope the city will emerge from bankruptcy quickly, hopefully next year.
Meanwhile, city Mayor, Dave Bing, who had no power in the bankruptcy decision because of a change in state law, said "As tough as this is, I didn't want to go in this direction," Bing said. "Now that we are here, we have to make the best of it. If it is going to make citizens better off, this is a new start for us."
For now, creditors, and the people of Detroit, can expect difficult times ahead, but there may be light at the end of the tunnel for the city, if the proceedings go smoothly. However, given the size of the city's liabilities, that may be a bit optimistic.
© 2013, Distributed by NEWS CONSORTIUM.
Pope Francis Prayer Intentions for December 2013
General Intention: Victimized Children. That children who are victims of abandonment or violence may find the love and protection they need.
Missionary Intention: Prepare the Savior's Coming. That Christians, enlightened by the Word incarnate, may prepare humanity for the Savior's coming.
Rate This Article
Leave a Comment
More Business & Economics News
- Black gold, Texas tea! How a major discovery in a tiny Australian mining town is about to change your world
- Unregulated? Bitcoin goes mainstream and why that's a good thing
- Casino mogul vows all-out war on online gambling
- Prepaid debit card, without fees offered by Google
- Digital killing the dinosaurs, Tribune Co. to cut 700
- Merit found in employees' complaints against Wal-Mart
- Same old tactic: Treasury to issue $1trillion in new debt at beginning of 2014
- PlayStation 4 sells one million units in U.S., Canada in first 24 hours
- U.S. Postal Service ONLY loses $5 billion this year
- Fr. Paul Schenck: Finding Living Faith on Catechetical Sunday
- The Movie Yellow: Incest as 'Normal' and Cassavates's Slides Into the World of Woes
- The Chicago School Teachers Strike Reveals the Need For School Choice
- The Sexual Barbarians and the Dissolution of Culture
- The Happy Priest Challenges Us to Ask: Who is Jesus to Me?
- Michael Coren on Canadian Public Schools: Teachers, leave those kids alone
- We Cannot Ignore Our Consciences: Cardinal Dolan On Religious Liberty
- In the Face of Danger, Successor of Peter Travels to Lebanon as a Messenger of Peace
- Reflections on the Dignity and Vocation of Women: Who or What?
Disclaimer: The columns, articles, advertisers claims and any other features provided on Catholic Online Business & Economics are provided for personal finance and investment information and are not to be construed as investment advice. Under no circumstances does the information in this content represent a recommendation to buy, sell or hold any security. The views and opinions expressed in an article or column are the author's own and not necessarily those of Catholic Online and there is no implied endorsement by Catholic Online of any advice or trading strategy.