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Detroit Teeters on the Edge of Bankruptcy, Creditors Are Left Holding the Bag

LowDown

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As Detroit teeters on bankruptcy, creditors are left holding the bag - The Washington Post

"Good God, who in their right mind would ever loan Detroit any money?" was what went through my head when I saw this headline.

At $19 billion in debt there must be a whole heap of idiot lenders out there.

Yes, the decline of industrial business led to Detroit's decline, but the massive debt was due to mismanagement by city government. When revenues fell they should have pared back spending, but they went to unions and the unions refused to countenance any cuts, and there was no political will to do the right thing. They just went on spending as if there was no loss of revenues with plenty of corruption to boot.

And now the whole thing has been taken out of their hands and left to a special manager to resolve.

The hope of some in the city government was that they'd get a bailout from President Obama, but Obama has long since thrown the lot of them under the bus.

Creditors have always assumed that holders of municipal bonds will get their money back no matter what, but Detroit may be unable to hold to that. If so it will throw a monkey wrench into the entire municipal bond market, which has already taken hits over poor city performance and falling ratings.
 

longview

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As Detroit teeters on bankruptcy, creditors are left holding the bag - The Washington Post

"Good God, who in their right mind would ever loan Detroit any money?" was what went through my head when I saw this headline.

At $19 billion in debt there must be a whole heap of idiot lenders out there.

Yes, the decline of industrial business led to Detroit's decline, but the massive debt was due to mismanagement by city government. When revenues fell they should have pared back spending, but they went to unions and the unions refused to countenance any cuts, and there was no political will to do the right thing. They just went on spending as if there was no loss of revenues with plenty of corruption to boot.

And now the whole thing has been taken out of their hands and left to a special manager to resolve.

The hope of some in the city government was that they'd get a bailout from President Obama, but Obama has long since thrown the lot of them under the bus.

Creditors have always assumed that holders of municipal bonds will get their money back no matter what, but Detroit may be unable to hold to that. If so it will throw a monkey wrench into the entire municipal bond market, which has already taken hits over poor city performance and falling ratings.
I thought cities and other municipals had bond ratings, the worse the rating the higher the
interest rate. So at the point of near bankruptcy the rate should be near 100%,
but there would be a lot of risk
 

fmw

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I thought cities and other municipals had bond ratings, the worse the rating the higher the
interest rate. So at the point of near bankruptcy the rate should be near 100%,
but there would be a lot of risk
Interest rates are determined by the bond issuer. It is up to the investor to decide whether or not to buy the bonds. Detroit currently has Caa2 and Caa3 ratings from Moody's. Those are ratings tha carry a warning that the bonds are substantially risky. In othe words they are what we often call "junk bonds." The problem isn't so much the interest rate it is the ability for Detroit to sell bonds at all at any interest rate.
 

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Well. In a schadenfreude sort of way, this will be entertaining to watch. What do you think the odds are of the rest of America learning a lesson from the collapse of Detroit? Almost... five percent? Maybe?
 

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As Detroit teeters on bankruptcy, creditors are left holding the bag - The Washington Post

"Good God, who in their right mind would ever loan Detroit any money?" was what went through my head when I saw this headline.

At $19 billion in debt there must be a whole heap of idiot lenders out there.

Yes, the decline of industrial business led to Detroit's decline, but the massive debt was due to mismanagement by city government. When revenues fell they should have pared back spending, but they went to unions and the unions refused to countenance any cuts, and there was no political will to do the right thing. They just went on spending as if there was no loss of revenues with plenty of corruption to boot.

And now the whole thing has been taken out of their hands and left to a special manager to resolve.

The hope of some in the city government was that they'd get a bailout from President Obama, but Obama has long since thrown the lot of them under the bus.

Creditors have always assumed that holders of municipal bonds will get their money back no matter what, but Detroit may be unable to hold to that. If so it will throw a monkey wrench into the entire municipal bond market, which has already taken hits over poor city performance and falling ratings.
Yeah.....there's no way any part of this could be laid on the greedy brass at the motor companies who continued to rake off all the profits instead of retooling everything and trying to compete with the foreign auto manufacturers. Not only did the dinosaurs from the 60's and 70's burn twice as much gas they were half as reliable and half as safe as the imports.
 

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Yeah.....there's no way any part of this could be laid on the greedy brass at the motor companies who continued to rake off all the profits instead of retooling everything and trying to compete with the foreign auto manufacturers. Not only did the dinosaurs from the 60's and 70's burn twice as much gas they were half as reliable and half as safe as the imports.
LOL Spoken from someone who can't or simply refuses to comprehend why large corporations are no longer able to swiftly alter course.

It's called unions. Labor, always has, always will be a business' largest expenditure. When you can't quickly change the direction of your labor, you can't alter the heading of your business when changing market conditions warrant same.

Detroit, will be the first city of it's magnitude to suffer complete financial collapse. The "city" has gone from over 4million, to under 700k in a very short span.

Cook county, Illinois isn't far behind.

Illinois and California are states racing for the same financial disaster. Neither can avoid it mathematically as currently run. Personally I believe the democrats who run both states are still banking (pardon the inferred pun) on a federal bailout.

The challenge we all face is the federal government is in the same boat. Mathematically unable to avoid the coming financial catastrophe. Then again, we gotta make sure we create more dependency on a government hand out, democrats do need a voter base. (-;
 
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fmw

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Yeah.....there's no way any part of this could be laid on the greedy brass at the motor companies who continued to rake off all the profits instead of retooling everything and trying to compete with the foreign auto manufacturers. Not only did the dinosaurs from the 60's and 70's burn twice as much gas they were half as reliable and half as safe as the imports.
You're suggesting that motor company executives have taken every nickel of profit for themselves? Pure emotion. No fact.
 

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You're suggesting that motor company executives have taken every nickel of
profit for themselves? Pure emotion. No fact.
That's Campbell for you.

We have some people that have moved to Texas from Michigan and the Nick Name for GM among the people of that are was " Generous Motors"

Every car purcahsed had a few thousand dollars added into it called Legacy cost

It was a place a person with NO High School Diploma ( if he knew someone ) could go and make 60 bucks an hour.

Retirees would recieve practically all of their Salary and cintinue to recieve the health care benefits until they died.

They also have access to GMs legal council for any private legal matter until they died.

Unions simply killed the golden goose with their greed.
 

cpwill

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Yeah.....there's no way any part of this could be laid on the greedy brass at the motor companies who continued to rake off all the profits instead of retooling everything and trying to compete with the foreign auto manufacturers.
:shrug: greedy brass would have done so. Greedy brass, almost by definition, wants to increase profits.

Gosh, I wonder what major group of laborers refused to allow the auto companies at which they worked to go through that retooling? I wonder what large power bloc here had a vested interest in the older manufacturing set-up, and the specific jobs it utilized?


;)


Not only did the dinosaurs from the 60's and 70's burn twice as much gas they were half as reliable and half as safe as the imports.
Look for... the union label.... when you want to know what never to put your kids in...... :)
 

Jack Fabulous

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Seems to me the city relied too much on one industry. Besides the auto industry, what did Detroit have? Any business that relies on one customer for it's prosperity is vulnerable. Vulnerable and AT THE MERCY of a single entity that could literally break it over night. A city is no different.

To me at least, that's the lesson here.
 

Empirica

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How many blue cities and states aren't teetering? :giggle1:
 

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To par down the disease of the dyingest city in America to a partisan talking point is pretty damn low. To admit to taking joy in watching it burn, as another did, is even lower.

The reality is that Detroit has been going down for way, way longer than the recent fiscal issues of America. It's been going downhill since I've been alive.

And in reality, people have been studying and debating and trying to figure out WHY for that entire time, because it's just not that simple. Every problem that afflicts Detroit is something that some other city has survived, and there is no obvious answer to why Detroit isn't.
 

SmokeAndMirrors

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How many blue cities and states aren't teetering? :giggle1:
Actually, blue states are mostly holding up the red ones. 25% of my federal taxes go to red states that are going broke while Minnesota weathers the storm with relative grace.
 

Empirica

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Actually, blue states are mostly holding up the red ones.
California has been receiving billions annually in federal aid_(that means your money)

Although the federal sequestration budget cuts will reduce that by 9 billion this year_

I think we can both agree that California is not a red state Smokey_

Do you ever wonder how a state with the 12th largest economy in the world got in such a mess?!

SAN FRANCISCO — After years of ballooning budget deficits, California finally seemed on firmer footing. Unemployment remained high, but revenues and housing prices were up. Taxpayers even voted themselves a tax increase to bring deficits down.

And then came the automatic federal budget cuts known as sequestration.

As the $85 billion in spending cuts slowly roll out nationwide, California officials are girding themselves for a blow not only to the state’s large military industry but also to its nascent economic recovery. Still, experts say, it will most likely slow down, though not derail, the state’s economic growth.
http://www.nytimes.com/2013/03/06/u...back-in-federal-cuts.html?pagewanted=all&_r=0
Most people would agree that it is probably due to bad management____very bad liberal management_

25% of my federal taxes go to red states that are going broke while Minnesota weathers the storm with relative grace.
Fraid not Smokey__at least not according to the federal government_

Most of your tax dollars have been propping up blue states for the last 12 years_

States-Funding.jpg
As you can clearly see, there’s a difference in the distribution of federal funds among the states. In fact, if you combine “strong GOP” with “likely GOP,” the amount is still less than then amount “strong Dem” states have received in the last 12 years
Red State, Blue State: Which States Have Received the Most Federal Funds Since 2000? | TheBlaze.com
If you don't trust The Blaze then click this government site where it got these stats: State Summary
 

SmokeAndMirrors

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California has been receiving billions annually in federal aid_(that means your money)

Although the federal sequestration budget cuts will reduce that by 9 billion this year_

I think we can both agree that California is not a red state Smokey_

Do you ever wonder how a state with the 12th largest economy in the world got in such a mess?!

Most people would agree that it is probably due to bad management____very bad liberal management_

Fraid not Smokey__at least not according to the federal government_

Most of your tax dollars have been propping up blue states for the last 12 years_


If you don't trust The Blaze then click this government site where it got these stats: State Summary
Well I think we can all agree that California is a uniquely mismanaged state, and it's also worth noting that in some parts it's quite red.

As far as your federal funding statistics, they conveniently ignore income taxes, which is the way the blue states prop red states on the regular and continual basis, so they don't really show the whole picture.
 

Empirica

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Well I think we can all agree that California is a uniquely mismanaged state, and it's also worth noting that in some parts it's quite red.
There is never enough red to bring California out of the blue_

It's not even considered red when it has a republican governor_

California is a hard-core leftist state which is why it is in such a mess_

As far as your federal funding statistics, they conveniently ignore income taxes, which is the way the blue states prop red states on the regular and continual basis, so they don't really show the whole picture.
Excuse me? What are you talking about?

Are you suggesting that federal income taxes are not part of those federal funds?
 

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To par down the disease of the dyingest city in America to a partisan talking point is pretty damn low. To admit to taking joy in watching it burn, as another did, is even lower.

The reality is that Detroit has been going down for way, way longer than the recent fiscal issues of America. It's been going downhill since I've been alive.

And in reality, people have been studying and debating and trying to figure out WHY for that entire time, because it's just not that simple. Every problem that afflicts Detroit is something that some other city has survived, and there is no obvious answer to why Detroit isn't.
The answer is obvious, you simply ignore it. The unions and democrat officials. The same thing is happening in each area liberals who now call themselves progressive..lol rule. Their answer to everything is raise taxes, hire government workers and spend like there's no tomorrow. Pssssssst......Tomorrow's here.

Cook County Illinois is the next one.

California and Illinois are bankrupt.

It's only a matter of time.

Call me lower than a snake's belly in a wagon rut, I don't care. It's truth. Same thing is happening on the federal level. Spend spend spend, tax the rich, beat up on business. Well business has shipped the jobs out. The rich just stop exposing their money to taxes. We have millions on federal aid of one form or another. Seventeen trillion in national debt, the federal reserve pumping 85 billion a month into toxic mortgage paper. There are no jobs. Does this seem like the same thing that happened in Detroit?

"We saved GM". lolol I have some oceanfront property in Arizona too. Taxpayers got white washed in the UAW bailout. GM??? They are still saddled by the anchor that is the UAW. They are moving to China. I don't blame them.

You just keep pointing fingers at everyone else, while the liberals destroy whats left of this once great nation.
 

SmokeAndMirrors

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There is never enough red to bring California out of the blue_

It's not even considered red when it has a republican governor_

California is a hard-core leftist state which is why it is in such a mess_

Excuse me? What are you talking about?

Are you suggesting that federal income taxes are not part of those federal funds?
If you read your own dishonest statistics, you'd be able to answer that yourself.
 

Captain Adverse

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Anyone remember the ROBOCOP series of movies?

Wasn't it Detroit that was bought out by the Omni Consumer Products (OCP) corporation?

Maybe Detroit WILL become the first city owned and operated by a business corporation, once they finally default on all that debt.
 

Verthaine

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Sometimes,cities die.

It's sad,and it's tragic,but there are various cities that never made it to today.
If empires can disappear,so can cities.

Rome might have been able to rebuild Pompeii had they wanted to when the area cooled down,but didn't.

The west has plenty of ghost towns of it's own.
Plenty of places that staked it fortune in one industry,and was SOL when the industry tanked.

I think the citizens of Detroit are the ones who have the imperative to fix their own city.
Detroit didn't get the way it is because of some natural disaster.
Ultimately,Detroit did it to itself.

I wish all the luck in making Detroit a better place (so much great music has come out of that city),but is going bankrupt going to automatically make Detroit a ghost town?
 

SmokeAndMirrors

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The answer is obvious, you simply ignore it. The unions and democrat officials. The same thing is happening in each area liberals who now call themselves progressive..lol rule. Their answer to everything is raise taxes, hire government workers and spend like there's no tomorrow. Pssssssst......Tomorrow's here.
The answer isn't at all obvious to anyone who isn't a hack. Plenty of cities are blue and have unions, and rank as some of the best-off cities in the country, including the one I live in (I started avoiding red cities after I saw what so many of them are like: no jobs, huge poverty, persistent crime... and it's a shame since so many of them once had a thriving culture).

You have a superficial and entirely self-serving concept of what is actually happening.
 

Oceandan

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The answer isn't at all obvious to anyone who isn't a hack. Plenty of cities are blue and have unions, and rank as some of the best-off cities in the country, including the one I live in (I started avoiding red cities after I saw what so many of them are like: no jobs, huge poverty, persistent crime... and it's a shame since so many of them once had a thriving culture).

You have a superficial and entirely self-serving concept of what is actually happening.
Ok name them.

You have a superficial and entirely self-serving denial of what is actually happening.
 

Empirica

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If you read your own dishonest statistics, you'd be able to answer that yourself.
As you suggested, I have re-read my own statistics but found absolutely nothing that disputes the fact that blue states do indeed receive more federal funds than red states_

Facts are Facts but you're free to believe whatever although I would think you'd be happy knowing more of your tax dollars go to your loving caring blue states than those mean ole red ones_
 
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