Detroit files for Chapter 9 bankruptcy amid staggering debts

The only thing the creditors can try at this point is to get a judge to rule that Detroit is not eligible for bankruptcy. Slim chance there... but we've all seen stranger things happen.

Basically, promises are made that have no bearing on reality and the now has to suffer for it. I wish they'd give them the opportunity for a 401k. At least then they'd have an option of seeing something after 40 years of dedicated public service.

Not to put too fine a point on it...

But the VAST majority of the money spent "honoring commitments made to retirees" is not made to "current residents of Detroit". Most of it was just a one-way funnel of money from Detroit out to the suburbs, other areas of Michigan and beyond.

It makes no sense for Detroit... to essentially be funding people in the suburbs... by taking on debt. That was just craziness.

For what its worth, its pretty easy to talk to these people. Its hard not to talk to them when an election is coming up.

I sometimes think voters that care enough to engage are a myth. :-)

I did one contract for a state government long ago. A friend of a friend brought me in because she knew I'd be unable to comprehend the normal pace of government work, and would therefore cluelessly batter my way though institutional inertia to get things done in time to meet certain goals.

I am definitely not suited for large organization, private or public. And there certainly were people who were just punching a clock. But a lot of people were, despite decades of service, still coming in every day determined to make things better.

As far as I can tell, it's the same thing with the teachers I know. It is a hard job, much more difficult than I could ever do. But despite that, most teachers I've met are doing the work because they really like teaching, and they care about what happens.

It blows my mind, really. My short attention span and desire to stir up trouble mean I'm well suited for startups, but could never spend 40 years doing the same thing. That, however, is exactly what we want out of government: stability, reliability, predictability.

There needs to be a "retirement" value for government employment that results in a good retirement but not extravagant. Sorry, but once you start passing the fifty thousand in retirement your getting a bit much. I would cap any retirement at median for your region, with minor and I mean MINOR boosts to cover medical for special circumstances, like really hurt in line of duty.

Go look at the bad retirements that people are paying.

At this point there are no "good" answers, but the path to the "right" answer is pretty clear, it is unsustainable to balance the retirement of a few on the labors of others.

I've made a number of suggestions to folks in Sacremento, pretty much anyone who asks and some that don't. On various ways the system might work. One outcome though is you don't get "lifetime income" unless you do what Mr. Money Mustache suggests and convert your lifestyle into something that can survive on a 3-4% annual withdrawal rate of your accumulated benefit.

Assuming a 75% recovery rate and 95% coverage, that means the monolines would be liable for about $475 million. I'm not sure (a) what fraction of the capital of U.S. monoline which insure municipal debt that is, or, (b) how that is distributed across variably capitalised muncipal monoline insurers.

Very much agree.

> However it's absolutely not true that "a lot of money in the US is being lent with the assumption that creditors will always be bailed out by the state or federal government", at least not a large amount relative to the total bond market size.

This is more subtle. While bankruptcies even on the scale of Detroit don't work with an implicit backstop assumption, large-scale muni bankruptcies on the scale predicted by Meredith Whitney are a different story. Let's face it: When push came to shove, Fannie and Freddie were not allowed to enter runoff mode.

There doesn't seem to be an opinion that this will kick over the can and start the bankruptcy run, but throw in a couple of more and the political&banking dynamics would turn interesting in a hurry.

Also, there's the issue of how we got here. When the police and firefighters say "we need this, or else" it's a little hard to turn them down. I don't think they are completely without blame.

The 67 riots were a big part of what provoked 'white flight' from detroit to the burbs. Of course, detroit was already losing population before that and the trend didn't speed up overall until much later, when the car companies started struggling. As always, it's more about economics than it is about race.

http://en.wikipedia.org/wiki/Demographic_history_of_Detroit

As throngs left Detroit in the 60s through 80s, they started families, but not in Detroit. As people died off in Detroit, there was no younger population to keep the numbers up.

It's not all that, but some people moving out in the 2000s (me, for one) made the % drop larger. Had there still been 2 million in Detroit like years past, a 10% drop would have hurt but not that much (and just given the economies around a population that large, it probably wouldn't have even dropped that much).

In the decades following the riots, the middle class black population followed the white population into the suburbs.

At the same time, the industrial economy of the rust belt collapsed.

Then the auto industry collapsed.

Any one of these things could set in motion a vicious circle (people leave, local services become underfunded, crime increases, property values decline, more people leave) but Detroit got hit continuously for ~4 decades.

Detroit was a symbol of what was great about America in the 1950's and 1960's. In 1960, it had the highest per-capita income in the U.S. It was built on American technology and American manufacturing prowess and an industry that brought wealth and good jobs to ordinary Americans, not just the top 1% (either financially or intellectually).

A quick glance over the list of GM factories[1] shows just one assembly plant in the city. Chrysler has a bit more going on[2] in Detroit. Of course, this doesn't take into account all of the suppliers, which is a huge omission. In my experience growing up in the area, it wasn't so uncommon for someone to be working for a company whose sole customer was one of the Big Three.

[1]: http://en.wikipedia.org/wiki/List_of_General_Motors_factorie...

[2]: http://en.wikipedia.org/wiki/List_of_Chrysler_factories