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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.
"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.