“Lock your doors and load your guns,” said the city attorney.

**corktownyuppie** · January-16-13, 08:06 AM

There are some in the city who talk about bankruptcy being their preferred choice. Councilman Kenyatta has actually refused to take part in other reform measures because he believes that bankruptcy would be better.

My opinion? I truly don't know. So why don't we talk about it? Where is the public dialogue? So for those who advocate for bankruptcy, are you willing to accept that things will get worse anyway? If so, why? Restructuring is never easy. It will be painful under both an emergency manager and a bankruptcy judge. It will be far, far more expensive in court, though.

San Bernadino filed bankruptcy in 2012.

http://www.deadlinedetroit.com/artic..._san_bernadino

After violent crime had dropped steadily for years, the homicide rate shot up more than 50 percent in 2012 as a shrinking police force struggled to keep order in a city long troubled by street gangs that have migrated from Los Angeles, 60 miles to the west.

“Lock your doors and load your guns,” the city attorney, James F. Penman, said he routinely told worried residents asking how they can protect themselves.

This is one of the prices that cities often pay for falling into bankruptcy: the police force is cut, crime skyrockets and residents are left trying to ensure their own safety.

**313WX** · January-16-13, 08:40 AM

Last checked, Detroit has been at that point for the last 3 decades, so I don't see what difference a bankruptcy would make. 386 homcides in a city that probably only has 600,000 to 650,000 people now? Ridiculous.

As someone else said, the citizens would probably experience the same amount of pain, but at least in a bankruptcy we know EVERYONE involved will share in the same amount of pain, because the citizens shouldn't be the only ones punished for the past mistakes folks at the state levels, former Detroiters who are now suburbanites, and past Detroit politicians made.

But there's no point in discussing it now. Given the current actions, bankruptcy will at least be delayed for a bit longer while Detroiters will endure even more pain alone until they're eventually able to flee as well [[per the below poll, a whopping 50% would leave if they weren't stuck for one reason or another).

http://www.detroitnews.com/article/2...RO01/210090369

**renf** · January-16-13, 09:19 AM

San Bernardino is one of several large California cities that have entered bankruptcy in the last year. The link below is to the essay in yesterday's
New York Times about the decrease in city services and sharp increase in crime in San Bernardino following bankruptcy. It is not obvious to me that the same thing would happen in Detroit.
Link

**hhockey** · January-16-13, 10:50 AM

Either scenario will be a blow, but both will solve nothing long term. Until we get the crime and murder rate down in Detroit people will continue to leave. In order for Detroit to come back it needs residences before retail in Downtown. There is not a city that can survive without a residential tax base. A city can not rely solely on business taxes or entertainment taxes. It take people which sadly Detroit is loosing at a record pace.

**illwill** · January-16-13, 05:20 PM

That's pretty sad. Unfortunately, Detroiter's have a history of walking away from their homes without a second thought. This will be the straw that broke the camels back.

Will that be the day Detroit officially hits rock bottom?

**Richard** · January-16-13, 05:36 PM

I still believe that bankruptcy would still be a huge PR mistake that would do more damage then good,nobody still knows exactly where the city stands and until there is a mayor and CC change I do not believe anybody will know,at this point they are only going to tell you what they want you to hear.

In three years the city auditor has published one case of departmental fraud,considering the past does anybody really believe that? The rest of the departments are run as a well oiled machine . I wonder how much CYA and paper shredding is going on knowing that it is about to hit the fan.

**Detroitnerd** · January-17-13, 10:44 AM

Bankruptcy would be fairer.

Look at all the EM legislation. It all does one thing: Protects the bondholders. At any decent municipal bankruptcy, the bondholders have to sit in the barber's chair and get their haircut too. With EM legislation, they're shielded from that and get their cut first, even though they're the ones taking "risks". Snyder appeared at a bondholders' meeting last year, I think, to tell them their ox wouldn't be gored.

Also, Lansing doesn't like Detroit, but they see this as their "in" to turn Detroit into a paradise of privatization. Let's sell off Belle Isle, or the water and sewerage department, or privatize the roads over the objections of the city. They can get away with this because a lot of the people opposed to "graft" in Detroit -- i.e. some unaccountable public administrator skimming money off the top and diluting our services -- are all in favor of privatization -- in which some unaccountable private administrator skims money off the top and dilutes our services, while breaking the unions.

Finally, the people of the state of Michigan -- hardly city boosters all -- rejected the EM law in a statewide referendum. What did Lansing do? They rammed through a look-alike EM law anyway.

No, this is unfair and undemocratic. There are many good reasons why bankruptcy would be fairer. There will be upheaval either way. But bankruptcy might show this region that Detroit just can't sink without having an effect on the whole area. And the alternative, whereby the banks are protected and austerity is imposed on the people, is inherently unfair.

**illwill** · January-17-13, 06:55 PM

Originally Posted by Detroitnerd

Bankruptcy would be fairer.

Look at all the EM legislation. It all does one thing: Protects the bondholders. At any decent municipal bankruptcy, the bondholders have to sit in the barber's chair and get their haircut too. With EM legislation, they're shielded from that and get their cut first, even though they're the ones taking "risks". Snyder appeared at a bondholders' meeting last year, I think, to tell them their ox wouldn't be gored.

Also, Lansing doesn't like Detroit, but they see this as their "in" to turn Detroit into a paradise of privatization. Let's sell off Belle Isle, or the water and sewerage department, or privatize the roads over the objections of the city. They can get away with this because a lot of the people opposed to "graft" in Detroit -- i.e. some unaccountable public administrator skimming money off the top and diluting our services -- are all in favor of privatization -- in which some unaccountable private administrator skims money off the top and dilutes our services, while breaking the unions.

Finally, the people of the state of Michigan -- hardly city boosters all -- rejected the EM law in a statewide referendum. What did Lansing do? They rammed through a look-alike EM law anyway.

No, this is unfair and undemocratic. There are many good reasons why bankruptcy would be fairer. There will be upheaval either way. But bankruptcy might show this region that Detroit just can't sink without having an effect on the whole area. And the alternative, whereby the banks are protected and austerity is imposed on the people, is inherently unfair.

Unfortunately,

I don't think BR in Detroit will affect the region any more than the city has already affected the region. Most companies, suppliers and plants are already located outside of the city limits. Our suburbs have been independent for so long that only Detroit will suffer.

I've always thought that Detroit gets a raw deal from the media anyway. When you hear Wall Street referring to Detroit, it usually means the region more sothan Detroit city. When Wall Street reports that Detroit is doing very well,it's usually NOT the city of Detroit that benefits from the BIG 3's earnings, but the suburbs. Because that's where most of the money is located. I wish more plants, suppliers and auto-related businesses were in the city but that's not the case.

However, the region would not be "squat" without Detroit because the region significantly benefits from the "world famous" name DETROIT CITY.

**313WX** · January-17-13, 10:55 PM

Originally Posted by Detroitnerd

Bankruptcy would be fairer.

Look at all the EM legislation. It all does one thing: Protects the bondholders. At any decent municipal bankruptcy, the bondholders have to sit in the barber's chair and get their haircut too. With EM legislation, they're shielded from that and get their cut first, even though they're the ones taking "risks". Snyder appeared at a bondholders' meeting last year, I think, to tell them their ox wouldn't be gored.

Also, Lansing doesn't like Detroit, but they see this as their "in" to turn Detroit into a paradise of privatization. Let's sell off Belle Isle, or the water and sewerage department, or privatize the roads over the objections of the city. They can get away with this because a lot of the people opposed to "graft" in Detroit -- i.e. some unaccountable public administrator skimming money off the top and diluting our services -- are all in favor of privatization -- in which some unaccountable private administrator skims money off the top and dilutes our services, while breaking the unions.

Finally, the people of the state of Michigan -- hardly city boosters all -- rejected the EM law in a statewide referendum. What did Lansing do? They rammed through a look-alike EM law anyway.

No, this is unfair and undemocratic. There are many good reasons why bankruptcy would be fairer. There will be upheaval either way. But bankruptcy might show this region that Detroit just can't sink without having an effect on the whole area. And the alternative, whereby the banks are protected and austerity is imposed on the people, is inherently unfair.

Well said as usual Dnerd.

**Richard** · January-17-13, 11:58 PM

Originally Posted by Detroitnerd

Bankruptcy would be fairer.

Look at all the EM legislation. It all does one thing: Protects the bondholders. At any decent municipal bankruptcy, the bondholders have to sit in the barber's chair and get their haircut too. With EM legislation, they're shielded from that and get their cut first, even though they're the ones taking "risks". Snyder appeared at a bondholders' meeting last year, I think, to tell them their ox wouldn't be gored.

Also, Lansing doesn't like Detroit, but they see this as their "in" to turn Detroit into a paradise of privatization. Let's sell off Belle Isle, or the water and sewerage department, or privatize the roads over the objections of the city. They can get away with this because a lot of the people opposed to "graft" in Detroit -- i.e. some unaccountable public administrator skimming money off the top and diluting our services -- are all in favor of privatization -- in which some unaccountable private administrator skims money off the top and dilutes our services, while breaking the unions.

Finally, the people of the state of Michigan -- hardly city boosters all -- rejected the EM law in a statewide referendum. What did Lansing do? They rammed through a look-alike EM law anyway.

No, this is unfair and undemocratic. There are many good reasons why bankruptcy would be fairer. There will be upheaval either way. But bankruptcy might show this region that Detroit just can't sink without having an effect on the whole area. And the alternative, whereby the banks are protected and austerity is imposed on the people, is inherently unfair.

A couple of questions.

If the city declares bankruptcy and gives the bondholders their haircut how is the city going to raise capital after the bankruptcy,as you will be showing the bondholders how secure their investment is, not a wise move in the future ?

Is it wise to use bankruptcy to spank the rest of the state in order to prove a point of they need Detroit?

Would it not be better to work this out and show the rest of the state that Detroiters are once again at the helm?Is this really a us verses them thing?

Well more then a couple of questions, but think long and hard about short term decisions that will have a very long term effect even more so when you travel into uncharted waters.

Getting control of the city first may prove there is no need for the bankruptcy and would eliminate the states need to want to take drastic measures to try and come up with resolutions that may or may not be in the city's best interests long term,do not give them the option to begin with as the state is also a bondholder and as of now they seem to have propped the city up while it gets back on its feet.

They could have said no and pulled the rug, then there would have been no options on saving anything in the city.You would have had to sell to make payroll or shut down what services that were left.

**corktownyuppie** · January-18-13, 12:51 AM

I'm with Richard on this. I think we should think carefully before screwing bondholders. Because once you do, it's gonna be a long, long while before we'll ever be able to borrow money again.

If we can restructure [[either via consent agreement or via EM), perhaps even asking bondholders to approve a haircut rather than forcing them to take one via bankruptcy court, maybe we can accomplish the same things without alienating our ability to raise capital.

I think the bondholders would be willing take a haircut as long as they knew that the money saved would go toward restructuring the city finances and city operations.

I'm not confident that can happen without either a bankruptcy or an EM.

**Hermod** · January-18-13, 04:56 AM

Dnerd's glee in "screwing the banks" by having the bondholders forced to take a haircut overlooks the fact that the big investment banks processed the sale of the bonds but hold very few of them. Muni bonds are primarily held by insurance companies for their reserves, by pension funds for employees both public and private, and by retired individuals. These are the people who will be taking the haircut.

**Honky Tonk** · January-18-13, 07:00 AM

Originally Posted by Hermod

Dnerd's glee in "screwing the banks" by having the bondholders forced to take a haircut overlooks the fact that the big investment banks processed the sale of the bonds but hold very few of them. Muni bonds are primarily held by insurance companies for their reserves, by pension funds for employees both public and private, and by retired individuals. These are the people who will be taking the haircut.

YEAH! Let's stick it to the MAN! Oooops, wrong man....

**Detroitnerd** · January-18-13, 11:02 AM

Originally Posted by Richard

A couple of questions.

If the city declares bankruptcy and gives the bondholders their haircut how is the city going to raise capital after the bankruptcy,as you will be showing the bondholders how secure their investment is, not a wise move in the future ?

For that we'd have to take a look at New York's bankruptcy proceedings. The bondholders in that case took some lumps for sure.

Originally Posted by Richard

Is it wise to use bankruptcy to spank the rest of the state in order to prove a point of they need Detroit?

I'm not proposing to punish the rest of the state or the suburbs to make the point that Detroit is needed. Far from it. I think of it more as the will of the free market to allow the natural costs of doing business as usual to fall on the bad actors. When things become expensive, we usually learn our lessons.

Originally Posted by Richard

Would it not be better to work this out and show the rest of the state that Detroiters are once again at the helm?Is this really a us verses them thing?

If by "working it out" you mean allowing the state to establish a viceroy of sorts under legislation that was rejected by the people and then rammed through again, so that the forces of capital can shield the big banks while imposing austerity on the people and privatizing the public sphere, I say that's not what "working it out" means at all.

**cman710** · January-18-13, 01:54 PM

Originally Posted by Detroitnerd

For that we'd have to take a look at New York's bankruptcy proceedings. The bondholders in that case took some lumps for sure.

New York City never entered bankruptcy, but it came very, very close. In the end, the city avoided bankruptcy with the help of a federal loan and the formation of the Municipal Assistance Corporation, which was a quasi-governmental entity. Some of the city's bondholders probably took a hit, but I am not certain how the specifics of the deal worked.

**Detroitnerd** · January-18-13, 03:23 PM

Originally Posted by cman710

New York City never entered bankruptcy, but it came very, very close. In the end, the city avoided bankruptcy with the help of a federal loan and the formation of the Municipal Assistance Corporation, which was a quasi-governmental entity. Some of the city's bondholders probably took a hit, but I am not certain how the specifics of the deal worked.

Thanks, cman. Sounds like everybody got a seat at the table AND in the barber's chair. And that's how it should work. Shielding one party and forcing austerity on another is not fair. Why should financial institutions be the only ones not "all in this thing together"?

Besides, any creditor I know always would rather have a percentage of something than all of nothing...