Some of the best analysis I've seen to date regarding the EM negotiations

[corktownyuppie]

Download it and read it. Very interesting commentary coming from the perspective of a fiduciary/advisor for bondholders. [[*Disclaimer, I work for a firm that works with Blackrock both co-operatively and competitively.) I don't agree with everything they are saying, but it's definitely very enlightening to see what analysts are saying from the perspective of the bondholder [[Detroit bonds and otherwise.)

Of note is the idea we don't hear much about regarding the shockwaves that will be sent through entire municipal bond market given a bankruptcy filing or a pre-bankruptcy settlement.

Of course, it argues that the state should step in and pay the bills otherwise the individual municipalities in the state [[and possibly nationwide) will take on increase in borrowing costs.

I've always thought that Lansing should provide more financial stability for social services in the city...HOWEVER...I also believe that they should be control the money and spend it as they see fit.

Blackrock is arguing that the State is going to pay the price for a Detroit bankruptcy either way...either through higher borrowing costs [[which is probably more politically viable) or via direct bailout and state takeover of not just budgets but individual city operations [[which is politically laughable). Blackrock begs the state re-consider this stance, implying that a bailout that they control will be far, far better than the bailout that will be determined solely by the marketplace and increased borrowing costs.

Of course, Blackrock is saying this not just because of their clients' exposure to unsecured debt. More likely it's because of the chilling levels of temporary illiquidity and volatility of both the secured debt in Detroit, and possibly the entire municipal market nationwide.

[[Translation, your $10,000 bond will still get paid off in full at maturity in 2023, but today's market value just dropped from $12,000 down to $4,000).

===========

I'm actually very excited by all this....reality is reality. The city will continue to shed population if it doesn't improve its service RIGHT NOW. What's good is that this is no longer a point of contention. My take is that city residents are going to get a HUGE uptick in service levels over the next 3-5 years.

But the question is who will pay the costs? Bondholders? Suburbanites? Employees? Retirees? Bond Insurers? All of the above??

I DON'T CARE. I LOVE IT!