Attorney Douglas Bernstein: Detroit Should Go Bankrupt

[313WX]

http://www.detroitnews.com/article/2...ON03/211160340

[Wesley Mouch]

from the article...The experience isn't painless, and it certainly wouldn't be for Detroit. Traditional political arguments on costs and spending, long favored by union leaders and elected officials, are subjected to economic analysis and aggressive litigation before a federal judge whose job is to help the debtor exit the process successfully, not reward political cronies and entitlement.The results can be sobering. For example, in the Vallejo case, the court approved an 85-percent cut in health care benefits, Bernstein says. And the New York Times reported earlier this fall that public pensions in Central Falls were reduced as much as 55 percent for the youngest retirees.

From The Detroit News: http://www.detroitnews.com/article/2...#ixzz2CXNW0Tfo

So the anger against the state will switch to anger against the Federal judiciary. I'd like to know more about this process. Am amazed that the forces against EM and EFM see this as better. Can anyone explain why those forces have acted as they do -- with this alternative?
I

[corktownyuppie]

So the anger against the state will switch to anger against the Federal judiciary. I'd like to know more about this process. Am amazed that the forces against EM and EFM see this as better. Can anyone explain why those forces have acted as they do -- with this alternative?
I

Hatfield and the McCoys. The hate spewing between Detroit, Suburbs, and Lansing is so poisonous that Snyder could show up with a cure for cancer, and people would still believe that he was just trying to knock us down.

By the way, there is precedent for this attitude in such a scenario. [[See Tuskegee Syphillis Experiments.)

You know that I generally side with you on this stuff, and I'm still in favor of the full blown PA 4 emergency manager. But you also have to understand that the people in Detroit have been lied to for so long and by so many [[both from Detroit, Lansing, white, and black), that people don't know what to believe. Listen to the AFSCME rep, screaming that if Lansing would just get out our hair, we wouldn't be running out of money.

What does that tell you? It tells you that we aren't even working with the same set of facts on the most fundamental point of this problem...that we are running out of money.

So, you are correct in being amazed that the forces against EM see bankruptcy as better....given the assumption that a) everything in the Detroit News article is true and that b) we actually are running out of money.

Now go take a poll of random Detroiters and ask them two questions:

[[1) Do you believe facts reported in the Detroit News?
[[2) Do you believe that we are actually running out of money?

And you'll have your answer

I think we should actually let a payless payday happen. I think that's the only way we'll all actually get on the same page.

[mwilbert]

There is a very low level of trust, and probably not a lot of experience reading financial statements either. And the city's finances aren't simple.

My guess is that even when the city has actually run out of money a lot of people won't believe there isn't more money someplace. One possible benefit of bankruptcy is that it might result in independent scrutiny of the city's finances that some people may find more credible than what they have seen previously.

[Vic01]

So the anger against the state will switch to anger against the Federal judiciary. I'd like to know more about this process. Am amazed that the forces against EM and EFM see this as better. Can anyone explain why those forces have acted as they do -- with this alternative?
I

Some still feel that they can bluster, bluff, accuse, and "protest" their way out of anything... let 'em try it against a Federal Judge. Time to get it over with...

[p69rrh51]

Some still feel that they can bluster, bluff, accuse, and "protest" their way out of anything... let 'em try it against a Federal Judge. Time to get it over with...

You got that right!!! No b*ullsh*t with a judge and no crying to the media or any other source just grin and bear it!

[Honky Tonk]

"By the way, there is precedent for this attitude in such a scenario. [[See Tuskegee Syphillis Experiments.)"

What bullshit! You're comparing something that happened 50 years ago to an EFM? No wonder this City is in the state it's in. Nothing like a little education, VERY little.

[Zacha341]

Well, in part the years of JUSTIFIED, IGNORED and ENDORSED graft, greed and corruption [[friends and family plans/ contract rackets etc), coupled with a shrinking tax base not helped by a bad economy brought us to this status [[bankruptcy).

The cash cow finally laid down.

[Hermod]

Well, in part the years of JUSTIFIED, IGNORED and ENDORSED graft, greed and corruption [[friends and family plans/ contract rackets etc), coupled with a shrinking tax base brought us to this status [[bankruptcy).

The cash cow finally laid down.

Now their only hope is a fed bailout [[Obama rides to the rescue with a wad of cash from his "stash").

[corktownyuppie]

"By the way, there is precedent for this attitude in such a scenario. [[See Tuskegee Syphillis Experiments.)"

What bullshit! You're comparing something that happened 50 years ago to an EFM? No wonder this City is in the state it's in. Nothing like a little education, VERY little.

Hey there... I didn't say their position was justifiable. Do I think that most Detroiters are too uneducated to understand the complexities of our financial position? Yes.

[[For the record, I think that most suburbanites are too uneducated to understand the all the factors that have led Detroit to where it is, as well.)

Do I think that there's a lot of distrust? Distrust that's embedded in the culture and goes back generations? Yes.

When you say that I'm comparing Tuskegee to an Emergency Manager, I'm not saying that the position was rational and deliberate. I'm pointing to the fact that some distrust has been so deeply embedded in the culture that it's even worse than ignorant, self-destructive beliefs about Labor/Management relations. It took a major bankruptcy with government financing to crack that problem, and it's still not disappeared yet.

If anyone is angry that people are angry, obstinate, irrational, and misinformed...then join the club. At the same time, if you don't understand why people are angry, obstinate, irrational, and misinformed...

...you'll never be able to do anything to change it, either.

[313WX]

I was going to respond, but judging from all of the responses thus far it would be a waste of time.

As stated in another thread, I know more than anyone how Detroit has gotten into the situation that it's in.

*Anti-urban policies out of Lansing that encouraged flight from urban Detroit, such as the lifting of the residency requirement and the refusal to place limits on sprawl in the state of Michigan.

*Incompetence of leaders in Detroit.

*The almost seemingly sexual perversion and bitterness of folks in the rest of the state about what has happened to Detroit and the need to punish those left behind in the wreckage called Detroit they fled from "just because."

*The fear of electing ANYONE who isn't black or doesn't have a "D" next to their name for political positions in the city.

*Amongst other things, such as the lack of true transit infrastructure, putting our eggs in one-industrial basket, etc.

Quite frankly, I'm sick of the toxic relationship between the state of Michigan, the suburbs and the city of Detroit. NO ONE REGION OR STATE in this United States of America is as half-ass backwards as we are when it comes to their relationship. That's, in large, why I soon plan to leave the entire state too, even if this "new Detroit" were to suddenly rise out of the ashes. What do you think the real reason is behind Ray LaHood not just giving us that transit money? Because he's sick of our bullshit too. That's why the last time Snyder, Bing and select others went to him with fake smiles and giggles about the 3-mile choo-choo down Woodward, he told then=m point blank "Get your act together first, then we'll talk."

With all of the above said, as a Detroiter do I trust the state of Michigan? Hell no. In fact, if it weren't for Detroit, once I left I probably wouldn't set foot within the Michigan state line. To show one good example for the distrust, the state of Michigan reneged, because of a legal loophole, on a written and signed agreement with the city of Detroit and screwed it out of $200+ Million dollars, in addition to needed tax revenue as somehow Detroit must still fulfill its end of the agreement either way.

That said, all of that is neither here nor there for me. As a taxpayer in the city of Detroit, my services have already been cut to the bare bones. What the state, which I already don't trust, is telling me now is that I must accept MORE cuts to the few/poor services I have so the precious bondholders, suburbanites who fled the city with its legacy costs and retirees won't have to take ANY type of haircut. Bullshit. The Federal Government put Title 11 Chapter 9 in place exactly for this purpose. They didn't want someone like Snyder imposing an blatantly unconstitutional legislation on its citizens. Whiule they wanted to resolve the financial crisis many cities and states were facing, they also wanted to do so legally.

So yes, bring on the bankruptcy judge. Will the process take a long time? Possibly. Will the pain imposed on me be any worse or better? Maybe, maybe not. Will Detroit be able to get out much of its debt obligations, which is what half of its budget goes to now? Probably Would the pain be evenly spread like it should be amongst all of Detroit's shareholders, not just the current residents and taxpayers? Definitely. Will Detroit, the suburbs and the state of Michigan be better off for it? You bet'cha.

[Honky Tonk]

"if you don't understand why people are angry, obstinate, irrational, and misinformed..."

I totally understand what happened, and it turns my stomach everytime I visit the WMAAH. I think it's hideous, and should never be repeated. But these kind of analogies are EXACTLY what consistantly leads efforts to resurect Detroit to failure and does nothing to promote relations. It also distorts the problem @ hand by encouraging some kind of false sense of entitlement. Detroit is financially screwed. It has no tax base, and no hopes of obtaining one. Former residents that were driven out of Detroit by crime and incompetence have no intention of returning, whether they be white or black. To sit in office, refuse to give an inch, and DEMAND compensation based on something that happened years ago, seems extremely counterproductive to me.

[corktownyuppie]

To sit in office, refuse to give an inch, and DEMAND compensation based on something that happened years ago, seems extremely counterproductive to me.

No one is demanding compensation based on the past. I'm not sure how you came to that conclusion. I am simply offering up the roots of distrust. And without trust, we cannot work together with Lansing. End of story.

I'm not calling for reparations, nor is anyone else. I think more reasonably, people are scared to death, anxious, angry, overwhelmed, and distrusting. From the filter of that experience, it's certainly understandable [[though not necessarily economically justifiable) that people are making short-sighted and irrational decisions.

Politicians exploit that emotional and social perspective into making more short-sighted and irrational decisions. Again, not justifiable. But it's what we're working with politically.

So to again, address the original poster's question on why many Detroiters prefer a bankruptcy judge to an EM from Lansing:

- Detroiters are not convinced that we are actually running out of money in any concrete way and will probably not be convinced until the city actually bounces a check.

- Even when/if that point ever happens, there is so much distrust and poison in the water that the city could never work together with the state to solve the problem. The roots of this distrust [[on both sides) are well documented. Their reactions and responses to this distrust [[on both sides) are understandable but also short-sighted.

There's the Gordian Knot.

[iheartthed]

My problem with this is that Bernstein presents this as a choice. Personally, I don't think Detroit has any viable option for self-sustainability left under status quo. Either Detroit is allowed to go bankrupt or Detroit surrenders its sovereignty to the state, and the state agrees to assume Detroit's liabilities. The only reason the state would consider assuming Detroit's liabilities is if a Detroit bankruptcy is a systemic risk... which is what it appears to be considering all of the urgent attention it has been given.

[Zacha341]

Well stated!

Politicians exploit that emotional and social perspective into making more short-sighted and irrational decisions. Again, not justifiable. But it's what we're working with politically.

So to again, address the original poster's question on why many Detroiters prefer a bankruptcy judge to an EM from Lansing:

- Detroiters are not convinced that we are actually running out of money in any concrete way and will probably not be convinced until the city actually bounces a check.

- Even when/if that point ever happens, there is so much distrust and poison in the water that the city could never work together with the state to solve the problem. The roots of this distrust [[on both sides) are well documented. Their reactions and responses to this distrust [[on both sides) are understandable but also short-sighted.

There's the Gordian Knot.

[Honky Tonk]

"No one is demanding compensation based on the past. I'm not sure how you came to that conclusion."

By following news stories and transcripts of COD government meetings.When first elected, there were calls for Obama to bail out Detroit because of this and that. Refusal to cooperate with State officials. Those meetings were embarrassing no matter what side of the EFM fence you're on.

[313WX]

My problem with this is that Bernstein presents this as a choice. Personally, I don't think Detroit has any viable option for self-sustainability left. Either Detroit is allowed to go bankrupt or Detroit surrenders its sovereignty to the state, and the state agrees to assume Detroit's liabilities. The only reason the state would consider assuming Detroit's liabilities is if a Detroit bankruptcy is a systemic risk... which is what it appears to be considering all of the urgent attention it has been given.

I'm tending to agree with this. If the pay otherwise is to try and pay off the debt by cutting more services, that's not going to happen.

And then I remember that joke from Family Guy about Detroit surrendering itself back to the Indian Tribe.

http://www.youtube.com/watch?v=rkxPtK_sMNk

I know it was all in jest, but it almost seems doing something like that would be the best solution to satisfy all parties. Just decorporate Detroit [[and even Highland Park) altogether then create new legal entities under the Home Rule Cities Act within the old borders. Meanwhile, the areas that have already reverted back to nature can remain uninhabited "rural land." The state can take over the retirees' pensions if it chooses to.

That's the ultimate goal anyway, right?

[Zacha341]

A federal bailout? Hah! Not likely if Politicians [[dem and repub) continue to be umm, politicians - elite!! Seems there were promises in 2008... Promises like pie crusts - made to be broken! And did we get any definitive promise [[not that I was anticipating such)? NO. I really hope people are not waiting for this....

The white house cannot even step away from the 'kick the can' turnstile to define if the FEDERAL 'fiscal cliff' is a real and pending crisis to address!

Now their only hope is a fed bailout [[Obama rides to the rescue with a wad of cash from his "stash").

Well, in part the years of JUSTIFIED, IGNORED and ENDORSED graft, greed and corruption [[friends and family plans/ contract rackets etc), coupled with a shrinking tax base not helped by a bad economy brought us to this status [[bankruptcy).

The cash cow finally laid down.

[Cincinnati_Kid]

Now their only hope is a fed bailout [[Obama rides to the rescue with a wad of cash from his "stash").

Not gonna happen. This isn't the 80's and Jimmy Carter isn't in the Big House anymore.

[Crumbled_pavement]

That's, in large, why I soon plan to leave the entire state too, even if this "new Detroit" were to suddenly rise out of the ashes.

Amen 313WX. I wish I could leave this fucked up city/state. Nothing, from outstate Michigan to the suburbs to the city itself functions in any sort of reasonable fashion. I hope the entire state of Michigan continues to implode as it should based on its fucked up way of doing things [[that especially includes the city of Detroit).

[313WX]

Not gonna happen. This isn't the 80's and Jimmy Carter isn't in the Big House anymore.

I think you're referring to the situation in NYC.

FWIW, and ironic as it is, Gerald Ford from Grand Rapids was the one who bailed out NYC when it was about to implode.

I think it was Jimmy Carter who loaned the money to Chrysler when was initially going to fail in the early 1980s [[or Ronald Reagan).

[Wesley Mouch]

No one is demanding compensation based on the past. I'm not sure how you came to that conclusion. I am simply offering up the roots of distrust. And without trust, we cannot work together with Lansing. End of story.
...snip...

There's no doubt that there's a lack of trust by a sizable faction of Detroiters. But do you think if we could just wave a magic wand of 'trust', would the unhappy Detroiters be ready to work together with Lansing?

Trust is built upon deeds. The unhappy Detroiters believe there have been injustices. These need to be addressed. I think these unhappy Detroiters want to be given the jobs, money, and prestige that Detroit had -- and they believe was taken from them. This is the compensation requested. Step One is hands off the cookie jar. No EFM. Step Two -- give back the $200+ million.

I think that to deny the belief in the disenfranchisement felt in Detroit is to miss part of the path to a solution.

[Zacha341]

Excellent points! I can only add to that the "They do it too" justification that led to the bold-faced corruption, graft and greed did not help the city! We need to ditch that kind of thinking... what's the point in retaining it? The justification did nothing but bring us to this point FASTER!

*Anti-urban policies out of Lansing that encouraged flight from urban Detroit, such as the lifting of the residency requirement and the refusal to place limits on sprawl in the state of Michigan.

*Incompetence of leaders in Detroit.

*The almost seemingly sexual perversion and bitterness of folks in the rest of the state about what has happened to Detroit and the need to punish those left behind in the wreckage called Detroit they fled from "just because."

*The fear of electing ANYONE who isn't black or doesn't have a "D" next to their name for political positions in the city.

*Amongst other things, such as the lack of true transit infrastructure, putting our eggs in one-industrial basket, etc.

[Lowell]

Obama already bailed out Detroit, all Detroit/Windsor metro, by saving GM and Chrysler. If you think we have problems now, it is almost unfathomable to think what our situation would be if those two companies, and all their suppliers, had been wiped out.

That was our shot. No COD bailout is coming.

When I play pretend mayor, I don't just shut down the urban prairie ala Detroit Works, I de-annex them. "Here Wayne County/Lansing, YOU take your turn with these problem areas and peoples. They are killing my bottom line. I'll keep downtown, midtown, Palmer Woods, Rosedale and other the revenue producing/working parts and wall off the problems just like the rest metro communities do and there will be no need for an EFM. Oh, and don't come crying to me until you are ready to discuss insurance redlining and metropolitan union."

[Strong]

I'm not for bankruptcy. I think if we wait things out, maybe more people will continue to move here, bringing with them revenue from tax sources.

City officials can cut where they can keeping the basis in place.

Maybe with enough positive signs the city will be able to sell some bonds.
State and Federal governments can grant some money for various programs, etc.
We need to continue thinking like the little choo choo train,

I know I can, I know I can