Detroit becomes largest US city to file for bankruptcy in history

[Mazmaz]

http://www.bbc.co.uk/news/world-us-canada-23369573

The US city of Detroit in Michigan has become the largest American city ever to file for bankruptcy, with debts of at least $15bn (£10bn).

State-appointed emergency manager Kevyn Orr asked a federal judge to place the city into bankruptcy protection.

If it is approved, he would be allowed to liquidate city assets to satisfy creditors and pensions.

Detroit stopped unsecured-debt payments last month to keep the city running as Mr Orr negotiated with creditors.

He proposed a deal last month in which creditors would accept 10 cents for every dollar they were owed. Mr Orr suggested at the time there was a 50-50 chance of the city needing to file for bankruptcy.

He also said the city's long-term debt could be between $17bn and $20bn.
'Only alternative'

In a letter accompanying Thursday's filing, Michigan's Governor Rick Snyder, a Republican, said he had approved the request from Mr Orr to file for Chapter 9 bankruptcy.

"Only one feasible path offers a way out," Gov Snyder said, adding that residents needed a clear exit from the "cycle of ever decreasing services".

"The only way to do those things is to radically restructure the city and allow it to reinvent itself without the burden of impossible obligations.

"It is 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".

Meanwhile, the White House said it was closely monitoring developments in Detroit.

"While leaders on the ground in Michigan and the city's creditors understand that they must find a solution to Detroit's serious financial challenge, we remain committed to continuing our strong partnership with Detroit as it works to recover and revitalise and maintain its status as one of America's great cities," said White House spokeswoman Amy Brundage.

Analysts say there are some concerns that businesses might ditch their operations in Detroit.

But, in the wake of the filing, US car company General Motors said it did not expect any impact on its operations, and hoped it would mark a "clean start" for Detroit.

"GM is proud to call Detroit home and today's bankruptcy declaration is a day that we and others hoped would not come," the company said.

The city, once renowned as a manufacturing powerhouse, has struggled with its finances for some time, driven by a number of factors, including a steep population loss.

Between 2000-10, the number of residents declined by 250,000 as residents moved away.

Detroit's government has also been hit by a string of corruption scandals over the years.

Declining investment in street lights and emergency services have made it difficult to police the city.

Detroit is only the latest US city to file for bankruptcy in recent years.

In 2012, three California cities - Stockton, Mammoth Lakes and San Bernardino - took the step.

In 2011, Harrisburg, Pennsylvania tried to file for bankruptcy but the move was ruled illegal.

But Thursday's move in Detroit is significantly larger than any of the earlier filings.

[Buffy]

Right on schedule for the Robocop movie. Little did we know it was predictive of the future!

[wipers]

Hey at least they have a good baseball team.

[quannum]

I guess you're on your knees right about now. Begging for your life.

[Kuya]

Robocop? More like Deus Ex: HR!

[Kalmado]

Robocop? More like Deus Ex: HR!

That's what I was thinking! Dan Gilbert(Cleveland Cavs, Quicken Loans) will be David Sarif. Now who will play Adam Jensen?!

[Mazmaz]

I have no idea what's going on in this thread

[Abandon]

how is that different than any other thread

[Pikarya]

How many times can a state file bankruptcy? Is it a one-off?

[vagus]

I have no idea what's going on in this thread

Really? Lol.

Seriously though, is it possible for a corporation (OCPish) to come in and save the city and start running shit? I'd laugh if a Japanese or a Middle Eastern LLC comes in. Doubt the American government would let it happen though.

[Abandon]

vagus, who is that lady

[vagus]

vagus, who is that lady

Suzanne Teresa wearing Canucks colors,

[archibaldcrane]

How many times can a state file bankruptcy? Is it a one-off?

You can keep doing it (as long as a judge rules it permissible), but like any other sort of bankruptcy it will hurt your future ability to obtain credit.

[Drex]

Really? Lol.

Seriously though, is it possible for a corporation (OCPish) to come in and save the city and start running shit? I'd laugh if a Japanese or a Middle Eastern LLC comes in. Doubt the American government would let it happen though.

No, the credit of Detroit is the only collateral for most of the debt. Worst case scenario is they privatize (sell off) some toll roads or utilities, but that's really unlikely since no fund holding bonds and stocks wants the deed to a power plant or whatever lol

[Acevalefor]

What has to happen to ensure future solvency? Paying off debt and/or writing off other debt only goes so far in ensuring there is enough income to keep the city running in the future. I admit I know little of bankruptcy law, especially when talking about a municipality. The city of Detroit is dying isn't it? Something like 250,000 people have left the city in the last 7 years right? What stops the exodus and subsequent losses from happening again or continuing to happen? Don't cities have to have a plan for coming back out of bankruptcy?

[Ddz]

Not surprised. Detroit is the armpit of America. Nuke it from orbit.

[archibaldcrane]

Not so fast niggas

http://www.huffingtonpost.com/2013/0...usaolp00000009

Detroit's historic bankruptcy filing is "unconstitutional" and must be withdrawn, according to rulings filed Friday afternoon.

Ingham County Circuit Judge Rosemarie Aquilina said that Detroit's bankruptcy filing violates the Michigan Constitution, which bans any action that threatens to cut the pension benefits of public employees, according to the Detroit Free Press.

Lawyers representing the city's pension funds and some retirees had won an emergency hearing Thursday afternoon to block the bankruptcy filing, CNN Money reports. The hearing was scheduled to start at 4:11 p.m. But at 4:06 p.m., word came that Detroit Emergency Manager Kevyn Orr had already filed the bankruptcy paperwork with the federal government.

Aquilina told those lawyers that she had planned to grant their injunction.

In three rulings she issued Friday, the judge wrote, “Plaintiffs shouldn’t have been blindsided,” and “this process shouldn’t have been ignored.”

In a statement, Michigan Attorney General Bill Schuette said the state would appeal:

Today Attorney General Schuette, on behalf of Governor Snyder, filed applications for leave to appeal with the Michigan Court of Appeals in the three pension cases before Ingham County Circuit Court Judge Rosmarie Aquilina. In addition, the Attorney General filed motions to stay the trial court rulings and any future proceedings while the appeals proceed. Later today, we expect to file additional motions seeking emergency consideration.
Aquilina, a Democrat appointee, also ordered that a copy of her order be sent all the way to the White House, saying that President Obama "bailed out Detroit" and might want to take a closer look, reports the Free Press.

Obama said Thursday that he is "monitoring the situation" but that the responsibility for Detroit's finances lies with municipal and state leadership.

[Alarial]

So is this how things went down (I'm asking, so feel free to correct me):

City is moving into insurmountable debt.

Businesses/banks/private entities owning most of the debt lobby to get this "Emergency Manager" put in place which bypasses the democratically elected board for the city, thereby allowing these decisions to be made based on "need" rather than the people's vote.

Emergency Manager then files for bankrupsy to get rid of all of the public employee's pension plans and settle the debt with the 3rd parties who lobbied to get him there in the first place.

Am I mischaracterizing this?

[Jaybar]

Wait, wasn't this guy's "election" brought up in the Wisconsin/Scott Walker thread as a really really bad decision that would end up destroying Michigan/Detroit citizens or some such?

[archibaldcrane]

Yeah I think so.

Gutting public employee pensions is a really low move for politicians. You become a public employee (be it teacher, civil servant, whatever) for stability - knowing it's NEVER going to make you rich. Stripping existing pensions ruins that single benefit.