Detroit’s Last Hope to Avoid Bankruptcy
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  • Mark Michael

    This is an eye-opening announcement. Detroit has been viewed as a basket case for so many years that it’s almost just part of how things are. But the specifics of $11 billion write-down, potentially, a municipal bond market that historically has been relatively safe and fine for low-risk investors, now has a blow to it that might reverberate nationwide. I used to buy munis and more so “industrial revenue bonds” in the 1980s and early 1990s when I wanted to transfer cap gains from a rising stock market to a saver, income-producing investment. Hospital bonds, university building funds, and infrastructure projects. Yes, occasionally a small city or town went into default, but an insurance fund saved your principal for you – lost the interest payments for 2 or 3 years.

    I think with so many “blue” big cities failing to face up to their outsized pension obligations, too large public workforces, the whole muni market will be a lot riskier, and cities have lost a low-cost funding vehicle. Think Chicago, Philly, several more cities in California, some New England cities, NJ, RI, MD.

    Needless to say, I’ve not bought – or owned – a municipal or revenue bond for at least a decade. Don’t own any corporate bonds, either anymore. Just some TIPS that pay 2% inflation-adjusted interest; that’s it. (The long-term rates are finally heading up, so I’ll be watching when to resume some careful buying.)

  • USNK2

    I don’t think it feasible, but why not offer Detroit to the Palestinians for a homeland?
    They can annex Dearborn, UNRWA can pay the bills; and Buffalo, NY gets missile defense and new NSA installations.

    • Vadim Pashkov

      You can not offer Detroit to “Palestinians” there are no such people

      • USNK2

        Yes, so true. I intended a sarcastic solution to Detroit’s dilemma.
        How about moving the United Nations to Detroit instead?

  • ljgude

    A 90% haircut is serious business for creditors of a city in a first world country. I’m glad to see that the state government has had a mechanism that allows the ending to be negotiated. Too bad they couldn’t have stepped in earlier. Clearly malfeasance should be detectable before before 90% of the money is gone.

  • Bruno_Behrend

    If the pensioners don’t receive as big a haircut as the lenders, it’s not a fair deal.

    • Pete

      EXACTLY!

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