Detroit Contagion Spreads
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  • bpuharic

    Here in PA the gov just gave 800M in tax breaks to large corporations. In MI over the last decade politicians have given over 7 blllion

    But it’s the unions…

    • Corlyss

      Kill the unions!

      • bpuharic

        Kill the corporations!

        • gwvanderleun

          Both of you, kill yourselves!

  • avery12

    But wait, there is more: Cities and municipalities have been racking up debt in addition to muni bonds with not-bond bond offerings.

  • The attempt by the “Honor Obama” judge to stop Detroit’s bankruptcy proceeding by saying that Michigan pensions were sacrosanct (but screw everyone else) due to the Michigan constitutional amendment regarding pensions means that nobody will touch new debt in Michigan until the issue is resolved. Until then, it’s a “known unknown” in terms of risk, so it can’t even be priced into the debt offering.

  • Andrew Allison

    “A lot of the people I talk to are investors who are just very angry about this,” said Matt Fabian . . . .
    Just what are they angry about? That they invested in unrepayable debt in the anticipation that they would be bailed out by the taxpayer? Or are they perhaps angry at the investment advisers and brokers who touted the bonds?

  • Corlyss

    “The sad fate of Detroit and its residents has commanded the lion’s share of attention in the press up to now.”
    A lot of the coverage has broadly hinted at the inherent racism of the rescuers in seizing control from the elected black officials. The same trope was played when the Congress finally got fed up with the District’s chronic indebtedness and mismanagement and put it into receivership. After the cokehead Barry was busted, all his payoffs to his political cronies were discussed and the deeply corrupt administration became evident. They had been known, for sure, but nobody talked about them until the cokehead was busted. Detroit’s have been on display for some time, but still the only motivation attributed to the rescuers has been a racist desire to show up another failure by black politicians.

  • BrianFrankie

    >> “A lot of the people I talk to are investors who are just very angry about this,” said Matt Fabian, a managing director at Municipal Market Advisors. “Bonds are so cheap everywhere across the whole market, there’s no reason to put anyone in Michigan bonds right now.” <<
    They should be angry. And the majority of that anger should be directed at the person they see in the mirror.
    Any halfwit could see that bond issues to Detroit would not be repaid. Blaming someone else for your losses when you invested in a bond that my 2 year old could see was a poor investment is the height of folly. Bond investors in Illinois, California, Connecticut, and other insolvent states and localities should remind themselves of that periodically.
    And the interest rates for Detroit and Michigan issues did not come close to realistically representing the risk. If you are going to invest in bonds of an obviously insolvent political entity like Detroit, you should at least demand compensation for it. I find this VM post to be very hopeful. You state the early signs are troubling. On the contrary, they are incredibly optimistic. Finally, we are starting to see realistic appraisals of risk. This will drive more circumspect and conservative behaviours, resulting in a bit of short term pain, but a much brighter long term financial situation for our country and our state and local governments. Is it possible – the US may actually start to live within its means? If so, the "Detroit contagion" could be the best thing to happen to the US in quite a while.

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