Judge declares Detroit eligible for Chapter 9 bankruptcy

Detroit will become the largest city in U.S. history to declare bankruptcy after a federal judge ruled Tuesday the city had met the legal criteria to win protection from its creditors.

U.S. Bankruptcy Judge Steven Rhodes delivered the 140-page ruling after four months of legal wrangling between a state-appointed emergency manager and unions worried about the bankruptcy’s impact on pensions. Rhodes presided over a nine-day trial to determine whether the city met the requirements for bankruptcy protection.

“This once proud and prosperous city can’t pay its debts. It’s insolvent. It’s eligible for bankruptcy,” Rhodes said from the bench. “At the same time, it also has an opportunity for a fresh start.”

Detroit, once a city of 1.8 million and the home of the American auto industry, has suffered a long descent into financial crisis. The city was home to just 713,000 people, according to the 2010 Census, a mere shadow of its post-war apex. Huge pension costs and a recession that sent American automakers into their own financial tailspins exacerbated Detroit’s budget gaps.

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Detroit's Death by Democracy

In 1860, an uneasy Charles Darwin confided in a letter to a friend: “I had no intention to write atheistically” but “I cannot persuade myself that a beneficent and omnipotent God would have designedly created the Ichneumonidae with the express intention of their feeding within the living bodies of caterpillars.” What appalled him had fascinated entomologist William Kirby (1759-1850): The ichneumon fly inserts an egg in a caterpillar, and the larva hatched from the egg, he said, “gnaws the inside of the caterpillar, and though at last it has devoured almost every part of it except the skin and intestines, carefully all this time avoids injuring the vital organs, as if aware that its own existence depends on that of the insect on which it preys!”

Government employees’ unions living parasitically on Detroit have been less aware than ichneumon larvae. About them, and their collaborators in the political class, the question is: What. Were. They. Thinking? Well, how did Bernie Madoff or the Enron executives convince themselves their houses of cards would never collapse?

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US Judge halts lawsuits challenging Detroit bankruptcy

Detroit can proceed with its bankruptcy filing unencumbered by lawsuits that sought to block the largest municipal Chapter 9 in U.S. history, a federal judge ruled Wednesday.

The decision by U.S. bankruptcy court judge Steven Rhodes halts lawsuits by pension funds and creditors, who argue that the bankruptcy violates provisions in Michigan’s constitution that protect public pensions. The judge also ruled that the federal court will decide if Detroit is eligible for Chapter 9 bankruptcy.

The Chapter 9 filing, which is expected to be a long, drawn-out process, will be closely watched by other cities and public pension funds around the country that are also tight on funding amid a weak recovery and a growing number of retiring baby boomers.

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Detroit Files Bankruptcy

Well they did it. Not surprising, but sad. There are going to be serious ramifications even for people who don't own municipal bonds.

The dangers of one party government; or how Detroit became America's municipal train wreck

Liberal economists have a ready response to conservatives who fret that U.S. debt might spiral out of control, a la Southern Europe: “America is not Greece.”

It’s true. Greece has much more public debt than does the United States, relative to economic output. Unlike Greece’s euro-denominated obligations, U.S. debt is in U.S. dollars. The U.S. economy is far more competitive than Greece’s tourism-and-tomatoes operation.

Certain parts of the United States, however, are like Greece. Just read emergency manager Kevyn Orr’s134-page report on Detroit, which has $20 billion in unpayable debt.

Couched in the workmanlike prose of a bankruptcy lawyer — which is what Orr is — the document nevertheless tells a harrowing story of institutional rot and social collapse, brought on by decades of government of, by and for special-interest groups. 

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Detroit’s Creditors Asked to Accept Pennies on the Dollar

DETROIT — An emergency manager who was sent to reverse the fortunes of this financially troubled city asked some of its creditors on Friday to accept pennies on the dollar as he laid out his plan for tackling Detroit’s staggering debt, kick-starting negotiations that could determine whether the city is headed to bankruptcy court. 

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Detroit Nearing Bankruptcy

Governor Rick Snyder of Michigan on Friday declared a fiscal state of emergency in Detroit in a move that could lead to the appointment of a financial manager who could file for the largest municipal bankruptcy ever.

Snyder's decision allows the city a 10-day grace period to formulate a plan to fix its finances before the governor reconsiders appointing an emergency manager who would likely drastically reduce services.

The Republican governor said he had identified a top candidate for the position, but he declined to name the person.

"I believe it's appropriate to declare the city of Detroit in financial emergency," Snyder said at a forum in Detroit.

Snyder said he agreed with a Feb. 19 report by a six-member team of experts that concluded Michigan's largest city is in dire financial shape and a plan put in place last April to aid Detroit was not sufficiently working.

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How bad is it in Detroit?

It's so bad that the cops have issued a statement cautioning would be visitors to come at their own risk. They (the cops) can't protect you. Also the chief of police resigned today in a sex scandal.

Detroit may let abandoned buildings burn

Cash-strapped, arson-prone Detroit could let fires in vacant buildings and homes burn themselves out to save the city Fire Department money.

The fiery notion from Detroit’s Executive Fire Commissioner Donald Austin surfaced as the documentary “Burn,” chronicling a year of Motor City firefighters’ camaraderie in the face of declining budgets and increasing fire calls, made its world premiere at the Tribeca Film Festival in New York.

“We are in no way looking to 'let the city' burn, this is about saving lives and money,” Austin said, according to a report Tuesday by NBC station WDIV in Detroit. “My department is strapped, the budget is strapped, and it’s time to look at a new way of doing things.”

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