Detroit has already defaulted on some (all?) of their unsecured debt. Bondholders will be the next group to take a beating.
+1
Here is a sobering photo essay of parts of Detroit. It has a very post-apocalyptic feel.
Well, that sounds like a whole lot of not good. I’m not sure how that works (and I would probably get angry at the explanation) - it sounds like people wheeling and dealing with other people’s money, and making bad decisions with it for bad reasons.
Detroiters call those sorts of pictures ruin porn and claim that the pictures are often misleading. For example, the building in the picture might have already been demolished or is slated for demolition.
A new article in the NYT by Charlie LeDuff.
That guy sounds a tad bitter.
Yikes.
I’m dismayed to hear about the megabux creditors with debt secured by casino revenue and utility taxes. Those are the guys who should end up getting hosed, not the pensioners. I hope the bankuptcy judge is able to toss those agreements and send the money where it really needs to go.
I know, it’s hilarious. Well, it’s probably sad for people living and trying to do business there. In one collage it’s Syria. In another collage, it’s about as mom & apple pie middle class American as you can get, with lots of petunias and geraniums. I just checked out a Detroit tourism site and it sure paints a different picture. It admits things aren’t all rosy everywhere.
Quite right-the oft-cited Packard plant was abandoned in the mid-1950s. Bt Detroit city government has been incredibly stupid-instead of raising taxes, they should have cut them-they might have gotten Japanese and Korean manufacturers to move in. Detroit is too far gone now-they should shrink the city to the downtown areas, and turn the rest of it into farmland.
He’s born and raised in Detroit, lost his sister to drugs and prostitution, seen it all. He’s the type of reporter who goes down to street level and interacts with the people who live and work in the city, both in government and public safety, and just plain citizens. His book opens with coming upon a homeless man at the bottom of an elevator shaft, frozen solid in a block of ice. He reports what he sees, which is a major embarrassment for the city managers. I don’t blame him for being bitter about the death of his home.
read his book “Detroit:An American Autopsy” and see why.
We do? No, we don’t, save for some over-privileged suburban kids who think they’re “making a difference” by renting an overpriced guarded loft in one of the few nice areas of the city (downtown, the New Center area by Wayne State University.) The rest of us are honest enough to know that those buildings which are “slated for demolition” were “slated” years ago, yet still stand as decaying hulks.
My suggestion in the other Detroit thread. It’s not just informational, but a warning that what has happened in Detroit is already happening in other major cities and could have the same result if action isn’t taken quickly.
I can’t keep track, but thank you for making the suggestion 
That was an interesting article. You must really want to be a cop or firefighter to be one in those conditions!
There is the first of undoubted many court decisions (I expect many appeals probably lasting several years):
" In a ruling that could reverberate far beyond Detroit, a federal judge held on Tuesday that this battered city could formally enter bankruptcy and asserted that Detroit’s obligation to pay pensions in full was not inviolable…The judge made it clear that public employee pensions were not protected in a federal Chapter 9 bankruptcy, even though the Michigan Constitution expressly protects them. “Pension benefits are a contractual right and are not entitled to any heightened protection in a municipal bankruptcy,” he said."
I don’t see alternatives to pension cuts eventually. Anyone?
Yeah, it’s pretty sad. I know a fair number of older guys who worked for Detroit most of their lives then retired to the Suburbs on their pension. Listening to them for the last couple months their union was flat out lying to them, saying that it was in the bag that the constitutional protection on their pensions would stand up. They finally started understanding the harsh reality yesterday, and it wasn’t pretty n the bar. But there is still a very good chance for them, the pension cut will be harsher on the still working, then the already retired.
I certainly didn’t open my mouth there, but I do see the side why you can’t make the pensions that special. If banks and investors get shuffled down the priority list too much, they will simply be less likely to take chances on Municipal bonds in the future. Raising rates and destroying cities that are in trouble but still savable.
And it is starting to sound a lot more like they are going to be pawning off art from DIA, which is sad also.
It’s an unsolvable mess of trying to figure out the most equitable way to screw everybody the least. But at least the city has finally started the process to get to a place where they can go forward.
That’s the most important thing. Default and bankruptcy was just a matter of time given the state of the city’s dysfunctional politics. But Michigan as a whole is on an upswing, and Detroit has a wonderful, vibrant history and a lot of beauty left in it. I think the future is bright but it will not be easy.
I wonder if there has been any talk of a state takeover of the city’s pension system. New York has done similar things - folding municipal pension plans into the state system - but in all those cases they were very small municipalities and the pension plans were not distressed.
One change they should consider is closing the current defined benefits pension plan, so that it only applies to current employees and retired employees, and switching to a defined contribution plan for all new hires. It wouldn’t provide any immediate relief, but it would be a sensible long-term change that prevents the pension plan from becoming a millstone, and also may give the employees greater protection in the event of future financial troubles.
I doubt the state will do much of anything. Michigan has a number of municipalities that aren’t much better off than Detroit, and may well end up in bankruptcy themselves. The state does not want to set up a precedent that it’s going to step in & take over a zillion dollars of underfunded pensions.