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Detroit eligible for bankruptcy protection, says Judge

  • Rejecting calls to dismiss the case, a Detroit judge finds the city acted in good faith when it filed for Chapter 9 bankruptcy. The city, he rules, could not have negotiated in good faith with its creditors without the filing. Pensions are unsecured creditors, says the judge, and thus not protected from potential cuts.
  • Assured Guaranty (AGO +0.4%), Ambac (AMBC -1.1%), and MBIA (MBI -0.1%) have all fallen about 1% since the ruling.
  • The unions and pension funds are likely to appeal the decision.
  • “It is indeed a momentous day,” says the judge, Steven Rhodes. “We have here a judicial finding that this once proud city cannot pay its debts. At the same time, it has an opportunity for a fresh start. I hope that everybody associated with the city will recognize that opportunity.”
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Comments (25)
  • Now If only IL would follow suit. They populous would be better served
    3 Dec 2013, 11:57 AM Reply Like
  • States are can not seek bankruptcy protection. It will have to address its debts the old fashioned way through negotiation and higher taxes.
    3 Dec 2013, 12:18 PM Reply Like
  • Why Can't a state file bankruptcy? They can default.
    3 Dec 2013, 12:50 PM Reply Like
  • Article 1 of the US Constitution prohibits states from impairing contracts and the Supreme Court has ruled (1977) that states cannot refuse to honor its debts simply because it would rather spend its resources in another manner.
    3 Dec 2013, 01:18 PM Reply Like
  • "Article 1 of the US Constitution prohibits states from impairing contracts and the Supreme Court has ruled (1977) that states cannot refuse to honor its debts simply because it would rather spend its resources in another manner."

     

    States unfortunately cannot print money, like cities. There could be a situation like Detroit on a massive scale that would that supreme court ruling from 1977 to the test. If the liabilities are big enough that 100% taxation of the populace would not be enough to fulfill them, it could easily happen
    3 Dec 2013, 08:12 PM Reply Like
  • What it should be is a wake up call but of course all will be ignored.
    3 Dec 2013, 11:57 AM Reply Like
  • The wake up call is be careful who you vote for. Although tough economic times helped sink the Detroit ship, it was elected officials who financially ruined the city.

     

    So, those retirees who will see monthly checks cut, did you blindly vote to maintain the status quo?
    3 Dec 2013, 01:42 PM Reply Like
  • I do think more dominos will fall..this being the precedent
    3 Dec 2013, 12:15 PM Reply Like
  • This is just the beginnining.... where else have pension funds been abused? This is an easy cookie jar for the elite that don't care for other's hard earned money to exploit as they know they will be off the hook since the consequences will be felt decades later.
    3 Dec 2013, 12:31 PM Reply Like
  • When will the US "file for Chapter 9"?
    3 Dec 2013, 01:11 PM Reply Like
  • Even if possible, why bother. Our debts are dollar denominated and we can simply print more $ to pay our obligations.
    3 Dec 2013, 01:19 PM Reply Like
  • We won't. Think what will be the world consequences. If you that euro collapse was bad, dollar collapse will be worse.
    3 Dec 2013, 04:37 PM Reply Like
  • Until the US$ is no longer the world's reserve currency.
    3 Dec 2013, 07:42 PM Reply Like
  • What kind of nonsense state constitution does Michigan have, whereby it says pensions are sacred and cannot be touched under any circumstances? Who would ever allow such a ridiculous thing to ever become law?

     

    Seems unrealistic and, shall I say, even unconstitutional to me.
    3 Dec 2013, 04:49 PM Reply Like
  • Just like Warren Buffett has said. You don't know who is naked until the tide goes out. The democrats have been buying votes this way for a very long time. The shame of it is their constituents have been to ignorant to figure out they are going to be the losers. Worse yet the constituents actually think the elected democrats care about them.
    3 Dec 2013, 05:33 PM Reply Like
  • This is what happens when people demand more and more government but less and less taxes.
    3 Dec 2013, 06:06 PM Reply Like
  • I might be willing to pay more taxes for less government....
    3 Dec 2013, 06:26 PM Reply Like
  • More cities will follow. America has two industries - currency printing and war mongering. Both arent terribly productive in the long run.
    3 Dec 2013, 08:09 PM Reply Like
  • Let's not forget the other growth industries-prisons and casinos.
    4 Dec 2013, 08:53 AM Reply Like
  • I don't believe they clamor for less taxes for all. They just want the other guy to pay them.
    3 Dec 2013, 06:14 PM Reply Like
  • The state trough is running empty as it will at the Federal level. The american public is going to get a taste of increasing cost of living inflation .
    3 Dec 2013, 06:38 PM Reply Like
  • When I hear of a gun crime occuring in Canada, I say to myself....'that cant be true, for guns are illegal in Canada and so no gun crime can exist'.

     

    When I hear that Detroit went bankrupt, I similarly say to myself 'that cant be true, for more government spending creates economic growth. Being that Detroit had tremendous government spending, the city's growth must have allowed them to pay for such expenditures'.

     

    Maybe I am wrong. Is it really true that big goverment is bad for an economy?
    3 Dec 2013, 08:08 PM Reply Like
  • You can't have a big political career without a big government to lend the career its support.
    3 Dec 2013, 08:32 PM Reply Like
  • Chicago next
    4 Dec 2013, 12:09 AM Reply Like
  • The feeling of nausea has subsided from when SA first told me that Detroit the industrial heart of America is incompetent.Mighty Detroit has a long recovery ahead of her,you are in my thoughts.
    4 Dec 2013, 05:34 AM Reply Like
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