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Bankruptcy In Detroit, What Happened?
Posted by Trevor Roberts on Jul 28, 2013 - 5:45:21 AM
UNITED STATES—We know
America is in dire straits when you have large metropolitan cities filing for bankruptcy.Last week, news surfaced over the world about the city of
Michigan filing for bankruptcy.It is the largest municipality in the history of the country to do so.So what does this mean for citizens of the ailing city that has been plagued with crime and a lack of resources for its citizens? Frankly, no one knows at this moment.
Speaking as a fellow Detroiter, its disheartening to hear such news about a city with so much potential, opportunity and growth, that it has hit rock bottom.The city may be down at the moment, but it’s not out.Like any great city, bad things happen, but you have to go to the depths of darkness to reach the burgeoning light at the end of the tunnel.Several weeks ago, the city was appointed an emergency financial manager to tackle the budget crisis that the city currently faces.
At the moment,
Detroit is anywhere between $18 billion-$20 billion in debt owed to creditors.That is a substantial amount of money owed to close to 100,000 creditors.As someone stated, “This didn’t happen overnight.”This is something that has been in the making for several decades. How didn’t anyone see this coming?Someone had to be looking at the books to check the city’s finances.Looking at what income was coming in, what income was going out?Someone has to take accountability for things instead of just pointing fingers.
The city of Detroit is in the midst of facing bankruptcy.
The reason this issue is so important is because there are other municipalities in other states across the
U.S. that are in similar situations.They may not have filed bankruptcy yet, but they could be very close to the verge of doing so.
Detroit is in the spotlight and not for good reason, but whatever happens in federal bankruptcy court can have a surmountable impact on the nation.
One big fight involves the pensions of city workers who are worried rather they’ll get the money that’s owed to them by the city for years of service.I’ll be the first to admit, if I’ve worked years for a city and I’m expected to have a pension and I’m told that pension could be gone, there will be hell to pay.People who may be on the verge of retiring have to re-think their plan and consider working longer than initially planned. There is much legal technicality involved in what the courts can and cannot do in regards to pensions which can have ripple effects nationwide.
Some have argued if it’s possible for the federal government to bail out the city of the
Detroit? At first, it appears to be a simple solution, but it’s more complicated than what many would suspect.Let’s say the federal government does give the city of
Detroit a bailout, it now opens the door for other municipalities in the same situation to ask for bailouts as well. It potentially opens a door that the government may not be willing to cross right at this moment considering their own financial issues.If they give it to one city, they’ll have to offer it to multiple cities.
So what is the lesson to be learned here, if there is a lesson at all?The lesson is monitoring finances are key.There has been a lot of financial corruption in the city of
Detroit over the years.That corruption has indeed placed the city in the predicament that it currently faces. To all those individuals living in cities surrounding
Detroit, who thinks it has no impact on them, think again.Detroit was once considered one of the largest cities in the nation; it still contains the highest number of residents in the state of
Michigan today, even though those numbers have greatly diminished. Detroit’s problem is also a problem of every resident in the state of
So don’t knock a city when it’s down, let this be a warning to all.What is happening to
Detroit could potentially happen to any other city or metropolis in
America.All it takes is a few misfires with income and you can have an explosive fireball that’s almost impossible to stop.
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