The Detroit bankruptcy is giving some Wall Street firms a splitting headache. The embattled city’s emergency manager Kevyn Orr is pursuing a lawsuit that would let the city stop making payments on a $144 billion pension deal centering on what the city’s lawyers are now calling “sham” contracts.
It’s beginning to look like Detroit’s bankruptcy will come in with a pretty hefty price tag. Despite being effectively broke, the city has already spent an astonishing $28 million on fees for lawyers and consultants brought on to assist with the process, some of whom are earning nearly $200,000 per month. The lesson for other cities: Bankruptcy is expensive and should be avoided if at all possible.
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