Detroit has become the most populous city to default since Cleveland in 1978 after it missed a...


Detroit has become the most populous city to default since Cleveland in 1978 after it missed a $39.7M debt payment on Friday. Overall, Detroit intends to suspend payments on $2B of unsecured debt as part of the plan of Emergency Manager Kevin Orr to turn around the city's horrific finances. Other measures include demanding that unsecured creditors accept a haircut of over 90%, and cutting pensions for active and retired workers.
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Comments (32)
  • flemsnopes
    , contributor
    Comments (124) | Send Message
     
    Do I smell a "crisis" here? Detroit may not be too big to fail, but it did vote 97% Democrat in 2012. Perhaps the unsecured creditors could be sacrificed, but who really expects the city employees to go quietly to the guillotine?
    "You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things you think you could not do before." Rahm Emanuel
    16 Jun 2013, 06:55 AM Reply Like
  • bgold1955
    , contributor
    Comments (2350) | Send Message
     
    97%? If true (which I believe impossible), what does that have to do with Detroit's problems that have been going on since the 1980's.
    16 Jun 2013, 10:11 AM Reply Like
  • flemsnopes
    , contributor
    Comments (124) | Send Message
     
    Detroit is the poster child for profligate public spending, especially on public unions and their bloated pension funds. Detroit is broke. Democrats must have the union vote. Democrats are currently in power. Voila...... crisis!
    http://bit.ly/12AslR3
    16 Jun 2013, 10:55 AM Reply Like
  • bgold1955
    , contributor
    Comments (2350) | Send Message
     
    Public unions and politicians, although I am not a fan and certainly understand the issue where they keep voting themselves more benefits at taxpayer expense, are creating a massive debt issue in Texas (3rd largest in the country, state wise) and democrats are wildly in the minority. This is a national non-partisan issue that will be resolved on a bi-partisan matter as it must be solved. Too simply say just because there is debt that its one party's fault is, IMO, incorrect. I do believe unions favor democrat policy over the other, but that has been true since way before the explosion of public debt which began in the last 3 decades and not just since the current admin.
    16 Jun 2013, 12:56 PM Reply Like
  • bgold1955
    , contributor
    Comments (2350) | Send Message
     
    Flem.... Read your link and assume its legit.... I stand corrected, I thought 97% with as many residents in Detroit proper was impossible.
    16 Jun 2013, 01:08 PM Reply Like
  • davislake
    , contributor
    Comments (41) | Send Message
     
    I did not assume the number was legit but when I went to the Detroit city official website there it is. Incredible.

     

    http://bit.ly/124S3H5
    16 Jun 2013, 02:15 PM Reply Like
  • Joseph Poma
    , contributor
    Comments (439) | Send Message
     
    Why so impossible? There were districts that voted 100% democrat in Philly?
    16 Jun 2013, 04:17 PM Reply Like
  • flemsnopes
    , contributor
    Comments (124) | Send Message
     
    You won't get any argument from me about the general nature of government spending, which is wildly out of control all over the country, whether under Democrats or Republicans. However, Democrats have historically gotten a significant majority of the public union vote, and thus there may an expectation of "payback" on the part of city employees in Detroit, which might lead the current administration in Washington, DC to intervene with your tax dollars by characterizing the situation as a crisis. I meant nothing more.
    16 Jun 2013, 08:19 PM Reply Like
  • Robert Loftus
    , contributor
    Comments (738) | Send Message
     
    Your argument fails when faced with the reality that the Federal Deficit, and deficits for states and municipalities, are all more likely to fall when a Democrat is elected to the top executive position. Republicans have an unfortunate history of crony capitalism - such as Cheney's famous No-Bid contracts for Halliburton, or Rick Perry needing $9 Billion in Federal stimulus funds to balance the budget in Texas.

     

    Detroit's problems actually happened because the leaders of the auto companies had their asses handed to them by the Japanese, which was a product of gross incompetence on the part of senior managers like Roger Smith and Robert Stempel. To claim that unions were the cause of the US not being able to compete is blatantly dishonest, as Japan has a tradition of offering far more generous employee benefits and support than American companies have ever been willing to offer.
    16 Jun 2013, 09:01 PM Reply Like
  • flemsnopes
    , contributor
    Comments (124) | Send Message
     
    At the risk of sounding impertinent, may I ask if you belong to a union?
    16 Jun 2013, 09:58 PM Reply Like
  • kcr357
    , contributor
    Comments (592) | Send Message
     
    Don't be too surprised by that percentage, wasn't there some lady in Ohio who voted 6 or 7 times?
    16 Jun 2013, 10:55 PM Reply Like
  • Jason Merriam
    , contributor
    Comments (955) | Send Message
     
    Robert,
    It's folly to blame the Japanese or global trade for US auto makers or Detroit's problems. US auto makers have always been able to compete. Unfortunately, high unit labor and legacy costs saw the US auto industry price themselves out of their own market(s).

     

    Detroit's shrinking revenue base and population decline is indicative of the implosion of its manufacturing hub. Detroit's municipal woes reflect how denial and years of kicking the can down the road come back to haunt when the bill is due.

     

    GM's unsecured bondholders received less than UAW (also an unsecured creditor) following their bankruptcy. I have empathy for city retirees and pensioners who face potential cuts.

     

    However, public sector unions have got to wake up to the fact that things are different now. 

     

    16 Jun 2013, 11:23 PM Reply Like
  • Teutonic Knight
    , contributor
    Comments (3447) | Send Message
     
    @Robert,

     

    Any form of blame does not make sense. The one controlling one's own destiny is oneself.
    16 Jun 2013, 11:30 PM Reply Like
  • Teutonic Knight
    , contributor
    Comments (3447) | Send Message
     
    This is the result of living beyond your means and poor management, as well as self-hypnosis, self-mesmerism, self-congratulate, and finally, self-immolate.
    16 Jun 2013, 09:08 AM Reply Like
  • The Long Tail of Finance
    , contributor
    Comments (1695) | Send Message
     
    @flemsnopes, thanks for very narrow-minded summary you've presented.
    16 Jun 2013, 12:21 PM Reply Like
  • flemsnopes
    , contributor
    Comments (124) | Send Message
     
    How so?
    16 Jun 2013, 09:59 PM Reply Like
  • The Long Tail of Finance
    , contributor
    Comments (1695) | Send Message
     
    Some additional analysis can be found here: http://bit.ly/1aiiJMt
    16 Jun 2013, 12:29 PM Reply Like
  • KJP712
    , contributor
    Comments (469) | Send Message
     
    As Bob Seger would say," Turn the Page" .
    16 Jun 2013, 01:27 PM Reply Like
  • Seth Walters
    , contributor
    Comments (675) | Send Message
     
    If Detroit defaults at record low interest rates, how are other municipalities going to cope when rates rise?
    16 Jun 2013, 01:43 PM Reply Like
  • Teutonic Knight
    , contributor
    Comments (3447) | Send Message
     
    no worries; none whatsoever, there will always be coming along yet another wonder boy II, and professor II, so on and so forth...wonder boy n, professor n...
    16 Jun 2013, 01:49 PM Reply Like
  • Seth Walters
    , contributor
    Comments (675) | Send Message
     
    obviously, but it doesn't speak well for bondholders.
    16 Jun 2013, 02:04 PM Reply Like
  • JohnBinTN
    , contributor
    Comments (4372) | Send Message
     
    Maybe the federal government can buy and hold their bonds. Obama can mandate it so by royal decree (er, I mean 'executive order').
    16 Jun 2013, 02:19 PM Reply Like
  • Seth Walters
    , contributor
    Comments (675) | Send Message
     
    It's not much different than the Fed buying and holding US Treasuries. Of course, it will end the same way. No such thing as a free lunch.
    16 Jun 2013, 09:38 PM Reply Like
  • Jason Merriam
    , contributor
    Comments (955) | Send Message
     
    The mess in Detroit is the result of sweetheart deals made decades ago gone bad. The "legacy" handshakes forged years ago between political interests and big labor have come home to roost.

     

    Labor unions have their own vision of what a "middle-class" should be. Sadly, Detroit is an example of this experiment failing miserably.

     

    The lesson for creditors here is that city leaders in bed with labor interests make for strange bed-fellows.
    16 Jun 2013, 02:38 PM Reply Like
  • Teutonic Knight
    , contributor
    Comments (3447) | Send Message
     
    BK country!
    16 Jun 2013, 03:25 PM Reply Like
  • Ericocean
    , contributor
    Comments (8) | Send Message
     
    Read "Detroit, an Autopsy" Not just unions, but complete corruption everywhere.
    16 Jun 2013, 03:22 PM Reply Like
  • The Geoffster
    , contributor
    Comments (4291) | Send Message
     
    This is neither a Democrat nor Republican issue. In any democracy, the politicians will satisfy the desires of their bases. In effect, the fault lies with the electorate.
    16 Jun 2013, 06:24 PM Reply Like
  • caupachow
    , contributor
    Comments (524) | Send Message
     
    It a political issue, republicans lower taxes to satzify their base. Now theyz needs to cut somez spending somewhere. Can it be that dangs hard?
    16 Jun 2013, 11:40 PM Reply Like
  • taxman100
    , contributor
    Comments (587) | Send Message
     
    So, half of Americans are dependent, lazy, or part of the system that fleeces not only the other half, but themselves as well. They just think they get more than they lose.

     

    Sounds about right to me.
    16 Jun 2013, 11:47 PM Reply Like
  • Jason Merriam
    , contributor
    Comments (955) | Send Message
     
    taxman,
    Sounds like one half needs to smack the other half upside the head.
    17 Jun 2013, 12:02 AM Reply Like
  • Christian Matthews
    , contributor
    Comments (8) | Send Message
     
    Kudos to Kwame et al for inspiring action from the govenor's office. Kwame's humanitarian side presented itself at last. Should make the prison time go by faster. So sorry! So ugly!

     

    But the Detroit Story is not being written only in Detroit. There are too many divisions of government everywhere which have too much power to tax and spend, and which afford the opportunity to rifle and piffle to uncaring slackers and slicksters. Voters beware!
    17 Jun 2013, 02:22 AM Reply Like
  • solojif
    , contributor
    Comments (133) | Send Message
     
    I guess all those union workers will have to work for a wage closer to the private sector, or go the way the Twinkie union workers went. Sorry Detroit you maxed out your CC, over spent for years, made promises you couldn't keep. Time to pay up. (kinda like all the people who promised to pay there mortgages on there 700K McMansions while holding a job that paid 40K a yr.) Let the City burn to the ground. Atleast then the city could sell some nice lakefront property.
    17 Jun 2013, 04:07 AM Reply Like
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