The city of Detroit today officially became the largest municipality in U.S. history to enter Chapter 9 bankruptcy after U.S. Bankruptcy Judge Steven Rhodes declared it met the specific legal criteria required to receive protection from its creditors.
The landmark ruling ends more than four months of uncertainty over the fate of the case and sets the stage for a fierce clash over how to slash an estimated $18 billion in debt and long-term liabilities that have hampered Detroit from attacking pervasive blight and violent crime.
Rhodes — in a surprise decision this morning — also said he’ll allow pension cuts in Detroit’s bankruptcy. Rhodes emphasized that he won’t necessarily agree to pension cuts in the city’s final reorganization plan unless the entire plan is fair and equitable.
“The court finds that Detroit was and is insolvent,” he said. “The court finds that the city was generally not paying its debts as they became due.”
Major creditors objecting to the bankruptcy included AFSCME, the UAW, Detroit’s two pension funds, the city’s public safety unions, retiree associations and a committee created to officially represent retirees during the bankruptcy.
Rhodes ruled the city is legally insolvent and obtained the necessary legal authorization from Gov. Rick Snyder to enter Chapter 9.
Creditors are expected to appeal the ruling, although experts say that appeals courts are hesitant to overturn bankruptcy rulings based on the facts.
Sharon Levine, an attorney for Michigan Council 25 of AFSCME, the city’s largest employee union, recently called the process a “terrifying use of Chapter 9” during the trial.
Chapter 9 terrifying? What does that make Chapters 1 through 8? It’s how you got here that scares the [bleep] out of me, toots. As the namesake of Obama said recently of his own fortunes, you’ve got nowhere to go from here but up!
From “Obama money” to no money:
And now that you’ve got the finances out of the hands of the local politicians, you might find capitalism beats socialism:
An all-star lineup of business and political leaders pitched entrepreneurship as the key to Detroit’s comeback today at the rollout of Goldman Sachs’ 10,000 Small Businesses program in the city.
Speaking at a Ford Field news event were famed investor Warren Buffett, Gov. Rick Snyder, Goldman Sachs CEO Lloyd Blankfein, Mayor Dave Bing and U.S. Sen. Debbie Stabenow, D-Mich., plus three Michigan congressmen and assorted others.
“The resources are here to have a great, great city,” Buffett told the news conference. He added that Detroit is an underutilized resource, much like the auto industry was a few years ago, and that creates a huge potential for growth.
Peppered with questions at the news conference, Buffett, an adviser to the Goldman Sachs program, agreed that he’s ready to invest his own money in Detroit if he finds companies worth buying here. He urged his listeners to contact his organization Berkshire Hathaway with tips on which companies to buy.
Buy low, sell high. With Detroit at rock bottom prices, and its costs corralled by bankruptcy law, Buffett knows a good deal when he sees one. Not the city itself, to be sure, but the sparks of private enterprise that still glow in the ruins.