The ink has not even dried on that bankruptcy filing submitted by the mayor of Detroit that the muni bond market is getting a fever.
Too quick however, might have been the move.
A State judge has rejected the bankruptcy filing, claiming that the mayor does not have the jurisdiction to annull, impair or diminish pension benefits.
Already civil servants, policemen and likewise city pensioners are quaking in their boots. In families with two civil servants or policemen, that would mean no pension whatsoever for the family.
Detroit pension funds, together with retirees, have filed lawsuits asking that the bankruptcy filing be dismissed on the grounds that it would diminish or destroy the pension funds, whose proceeds are protected constitutionally.
The above lawsuits notwithstanding, the mayor and his subordinates all reiterated that the 117,000 retirees who would have benefited from the pension fund might suffer, but the rest of Detroit's population would benefit. Such tone deafness does not endear the major to anyone.
In turn, the mayor said that almost 700,000 people in Detroit "do not deserve a 55 minute response time [to an ambulance or distress call], endemic blight and crime, who don't deserve no hope or future...."
But to say that all civil servants and policemen should have to give up their pensions to fix Detroit's problems is appalling.
Already politicians are having a field day on the bankruptcy filing. Rand Paul has vowed to block the 20 billion bailout of Detroit "with his dead body", or whatever part of his anatomy. The other politicians are not so sanguine, but they realize that Detroit might be the tip of the iceberg. If they start bailing out cities, there will be no end in sight to the disbursements.
In 2001-2007, when municipalities and cities were gorging on the real estate boom bonanza, many of them overspent, or invested in bad derivatives tied to the mortgage scandal. Now many of them might have to declare bankruptcy to get out of the mess they're in.
Detroit however, has been mired in a disastrous economic situation for decades. As jobs moved overseas, Detroit died. Only those too poor to move stayed. And that means that the city has nowhere to go.
The fight over Detroit's bankruptcy could be long and costly, just like its slow demise. Years of corruption and mismanagement, coupled with the shutting down of all its industry, have finally brought it to the brink.
A good source of information can be found in the documentary 'Deforce' which details in depth how Detroit slowly slipped into financial ruin, and the link for an additional documentary on the city below.
http://youtu.be/RjMXFOMhbeQ
Op-ed
Source : al Jazeera / 7.20.13
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