Nolan Finley thinks Detroit hasn't sufficiently paid for the sins of filing bankrupt.

[iheartthed]

But he expresses sympathy for the pain bore by the banks as a result of Detroit's bankruptcy. He also suggests that the city should have been liquidated:

And as the Chapter 9 filing played out, it was held mostly harmless from its own mismanagement, incompetence and corruption.

That may not have been the best outcome.

Instead of Detroit facing its mistakes, those who loaned it money over the years, for reasons good and questionable, paid the price for 60 years of denial and neglect.

Roughly $7 billion in debt was erased. Very few of Detroit's creditors walked away whole; most took haircuts ranging from 14 cents to 86 cents on the dollar.

Nobody weeps for banks and bond houses. Indeed, the protest signs bore the message, "Make the Banks Pay!"

Money lenders have never been popular — until someone needs a loan.

In Detroit, creditors, as they typically are, were vilified as greedy corporate exploiters who wanted to rob the city of its jewels and steal food from the pantries of its retirees.

But what did these financial institutions actually do? They loaned money to the city when it asked for it, and then expected to be paid back.

http://www.detroitnews.com/story/opinion/columnists/nolan-finley/2014/11/09/finley-banks-paid-detroit-bankruptcy/18667677/

[mwilbert]

But he expresses sympathy for the pain bore by the banks as a result of Detroit's bankruptcy. He also suggests that the city should have been liquidated:

This column is a reminder as to why Finley is not to be taken seriously.

Detroit is not a business. You can liquidate a business [[not that bankrupt businesses are always liquidated) and transfer the assets to other entities. If there were other entities that wanted to assume responsibility for Detroit, that might be an option, but so far as I know there are no such entities, so there is no resolution that is analogous to a business liquidation. The Michigan constitution also doesn't have any provision for such a thing.

People who were lending money to Detroit anytime in the past 30 years should have known that Detroit wasn't a great credit risk. They should have [[and did) charged Detroit higher interest rates as a consequence of that risk. That's what lenders do, and that's how lending works. Sometime a loan goes bad, and that is part of the business.

[Hypestyles]

The banks should be made to pay for blight removal throughout the city.

[EastsideAl]

What an asshole. If he doesn't think we're being punished enough he should come and live here and see for himself [[of course, having that asshole living here would be even more punishment for us).

[Hermod]

Banks didn't lose much in the bankruptcy, it was the entities that insured the bonds against default that paid the price. My DWSD bonds were paid at par because of the underlying insurance.

My regret is that Orr didn't use his opportunity to suspend civil service protections and do a number on the over-staffing and under-performing in the various city departments while he had the authority.

[nain rouge]

I think the whole banks off with only X cents on the dollar is disingenuous because it ignores interest payments. A bank might walk off with only "$0.70 on its dollar", but if it had successfully charged Detroit with exorbitant interest rates while the debt was carried, the bank probably made a pretty nice profit on its loans. Banks don't charge sketchy lenders high interest rates for fun. It's part of a legitimate business model, and probably most of the banks made a profit off of Detroit in the end [[or are going to).

[nain rouge]

If anything, what Nolan wrote is like a reverse psychology fluff piece. The main "takeaway" is that Detroit really screwed those poor banksters over. We should be happy.

[bailey]

If anything, what Nolan wrote is like a reverse psychology fluff piece. The main "takeaway" is that Detroit really screwed those poor banksters over. We should be happy.

Well, in the short term sure. But next time Detroit needs to borrow to fund something, will there be any capital available at anything approaching reasonable terms? Something lost in the hackishness of the article is the very real problem of very little structurally changing.

[Scottathew]

What an asshole. If he doesn't think we're being punished enough he should come and live here and see for himself [[of course, having that asshole living here would be even more punishment for us).

That's kind of what I thought when I read it. He acts as if it's sunshine and rainbows in Detroit, just with $7B less debt.

Shame on Detroit leaders, and shame on the banks for lending money to Detroit when it was in such bad financial state.

I wonder how Finley felt when the baking industry collapsed our economy and sent us into a deep recession and had to be bailed out on the backs of the people.

[motz]

I wonder what Nolan Finley thinks of Donald Trump and his perpetually bankrupt self. I strongly doubt he'd criticize Trump in the same manner that he'd criticize Detroit, and Trump is someone who absolutely without a doubt abuses the system

On top of that, no one weeps for those who invest their money poorly. At least, no one should. Because if you make a poor investment and are given the chance to do the properly research, there is no excuse besides "I made a bad decision". Finley and others are the types who don't think that markets that take risks or behave poorly/illegally [[see mortgage fraud and the financial crisis) should have to face the consequences for their actions. Syncora and FGIC willingly backed the deal, and if they didn't know what they were getting into, that's their fault. It doesn't matter what documents they were given, if they were lied to... All they had to do was visit Detroit. Nothing more.

[sumas]

Nolan Finley is an ass. No more, no less. Less is what I would like to see/read

[bailey]

I wonder what Nolan Finley thinks of Donald Trump and his perpetually bankrupt self. I strongly doubt he'd criticize Trump in the same manner that he'd criticize Detroit, and Trump is someone who absolutely without a doubt abuses the system

On top of that, no one weeps for those who invest their money poorly. At least, no one should. Because if you make a poor investment and are given the chance to do the properly research, there is no excuse besides "I made a bad decision". Finley and others are the types who don't think that markets that take risks or behave poorly/illegally [[see mortgage fraud and the financial crisis) should have to face the consequences for their actions. Syncora and FGIC willingly backed the deal, and if they didn't know what they were getting into, that's their fault. It doesn't matter what documents they were given, if they were lied to... All they had to do was visit Detroit. Nothing more.

So, basically, it's OK for Detroit leaders to scam the banks and Detroit should not in anyway be held responsible for that scamming.... but banks should bear the full brunt of the mortgage meltdown?
being a tad inconsistent aren't you?

[Wesley Mouch]

I haven't read the article yet -- I will do so.

But my reaction to the posts here is that the headline fits. Posters are blaming banks. They are not blaming themselves. QED.

[nain rouge]

So, basically, it's OK for Detroit leaders to scam the banks and Detroit should not in anyway be held responsible for that scamming.... but banks should bear the full brunt of the mortgage meltdown?
being a tad inconsistent aren't you?

I think the banks had a more nuanced view of what could be gained from loaning to a city in terminal financial decline. Look at this way: if you collect $20 million in interest and later receive $20 million back on your original $30 million loan in bankruptcy court, you made a tidy profit. I'm sure such scenarios weren't lost on the banks. They knew Detroit was more likely than not to make minimum payments for as long as possible - rather than pay down its debt - and structured deals accordingly.

Probably some banks took more obscene risks, but those lenders knew what they were getting into and were willing to gamble.

[nain rouge]

Let's also not forget the de facto "collateral" some of the banks collected during the bankruptcy proceedings, such as the parking garage deal. But let's hear some more propaganda about how the banks were screwed. That way we won't even dare think the borrower was screwed.

[hewettbr]

But he expresses sympathy for the pain bore by the banks as a result of Detroit's bankruptcy. He also suggests that the city should have been liquidated:

i think you are all misinterpreting this piece. Hes just stating facts and how this would have gone differently if the city were a business. The end result is we should all be grateful things turned out the way they did.

Don't let your personal dislike for the man cloud the real meaning of his story, and he never said the city should have been liquidated. He only suggested that is what the creditors were demanding.

[bailey]

Let's also not forget the de facto "collateral" some of the banks collected during the bankruptcy proceedings, such as the parking garage deal. But let's hear some more propaganda about how the banks were screwed. That way we won't even dare think the borrower was screwed.

I think there are far too many people focused on extracting punishment from the Banks rather than the important issues of still having a city that is half empty, blighted, with an extremely poor populace, and massive problems that aren't solved because the banks took a haircut.

Banks were the convenient boogeyman. Now that they have been dealt with, the hard work begins. I think that is the point buried in Nolan's article.

[iheartthed]

I think there are far too many people focused on extracting punishment from the Banks rather than the important issues of still having a city that is half empty, blighted, with an extremely poor populace, and massive problems that aren't solved because the banks took a haircut.

Banks were the convenient boogeyman. Now that they have been dealt with, the hard work begins. I think that is the point buried in Nolan's article.

If that's what he meant then he should have said that, no? I think most in and around Detroit would agree that there is much work to be done. I don't think most in and around Detroit would agree that Detroit hasn't suffered far more than any bank under the factors that led it into bankruptcy, which is what Finley seems to suggest.

[Packman41]

i think you are all misinterpreting this piece. Hes just stating facts and how this would have gone differently if the city were a business. The end result is we should all be grateful things turned out the way they did.

Don't let your personal dislike for the man cloud the real meaning of his story, and he never said the city should have been liquidated. He only suggested that is what the creditors were demanding.

^^^^THIS^^^^ That was my take also. The process could have been so much worse and with much worse results.

If you have not already done so, then take the time to read the ENTIRE Free Press Special Section http://www.freep.com/longform/news/l...yder/18724267/ After you read it then ask yourself that if the team of "adults in the room" were absent from the process would we have the result we have today?

My guess is that the ideologues would still be bickering and we would not be exiting bankruptcy today.

[bailey]

If that's what he meant then he should have said that, no? I think most in and around Detroit would agree that there is much work to be done. I don't think most in and around Detroit would agree that Detroit hasn't suffered far more than any bank under the factors that led it into bankruptcy, which is what Finley seems to suggest.

I'm not sure if the suffering leading up to Bankruptcy is the issue. The point is the banks [[rightly, IMHO) took a substantial haircut but, the citizens of Detroit aren't going to see anything but BETTER services and maybe even lower taxes for those services [[hopefully). I think there is a the legit point here... if the total burden falls on the lenders and non-resident retirees, where is the impetus for Detroit politicians to make the hard changes so that Detroit doesn't end up right back where it was?

[iheartthed]

I'm not sure if the suffering leading up to Bankruptcy is the issue. The point is the banks [[rightly, IMHO) took a substantial haircut but, the citizens of Detroit aren't going to see anything but BETTER services and maybe even lower taxes for those services [[hopefully). I think there is a the legit point here... if the total burden falls on the lenders and non-resident retirees, where is the impetus for Detroit politicians to make the hard changes so that Detroit doesn't end up right back where it was?

But bankruptcy was the means to an end, since the city was starving services to service debt payments. The citizens were already feeling that pain and the bankruptcy spread that pain to the banks, as it should.

[bailey]

But bankruptcy was the means to an end, since the city was starving services to service debt payments. The citizens were already feeling that pain and the bankruptcy spread that pain to the banks, as it should.

Bankruptcy IS a means to an end because usually EVERYONE gets dinged and everyone changes behavior afterwards. The individual gets to keep their house and have the second mortgage stripped, but they lose the classic car and the cottage. The bank loses money and the debtor isn't going to get any credit anywhere for 10 years...etc.

What he's saying [[and is lost in his smarm) is there is substantial moral hazard here for the political class if the total cost of the last 60 years of incompetence is laid at the feet of the banks and city retirees who live elsewhere. Now they are "flush" there is no impetus on Detroit political leaders to make the choices that will prevent insolvency again because the voters don't care because all they see is better services and lower taxes.

They've stripped the liens...and slayed the evil bank fat cat bogeyman. great, the "what now" is the issue. If it's back to business as usual because hey, now there's a heap of new bond money... then the whole thing was for naught and we should just pack it up.

It's Donald Trump in municipal form. next time there won't be a grand bargain to bail out retirees with a 4.5% cut and a 20% cap.... pensions will just be gone altogether.

[mwilbert]

I think there is a the legit point here... if the total burden falls on the lenders and non-resident retirees, where is the impetus for Detroit politicians to make the hard changes so that Detroit doesn't end up right back where it was?

First, there have been quite a few changes already. The number of city employees is down quite a bit, benefits have been reduced, and salaries have been cut.

Second, that is why there is a financial oversight board.

Third, what is the alternative? Providing even fewer services to the population of Detroit? Assuming that were actually possible, how would that be a good idea?

[nain rouge]

...because the voters don't care because all they see is better services and lower taxes.

Sort of like the federal government and American voters, eh? I don't know how we can act all high and mighty about Detroit when we treat our own national government like a bottomless piggy bank.

[bailey]

First, there have been quite a few changes already. The number of city employees is down quite a bit, benefits have been reduced, and salaries have been cut.

Second, that is why there is a financial oversight board.

Third, what is the alternative? Providing even fewer services to the population of Detroit? Assuming that were actually possible, how would that be a good idea?

City employees are down and costs are down because it was at the point of a gun.... now that gun has been holstered? I guess we're leaving it up the FAB. Ok, how long before the FAB is just the overseer of the plantation and the man is keeping Detroit jewels for suburban interests?

The issue is there is no discussion about alternatives... its all about getting out of Bankruptcy and getting back to normal. "Normal" is what got Detroit to bankruptcy.

It seems to me there is a lot of ball spiking because of a belief that exiting BK was the goal line...when in fact it was only the 35 yrd line.