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Economy Detroit is the largest American city ever to file for bankruptcy protection decades of mismanagement -- -- in the motor city once that.
This symbol of American industry in fact the photo behind this again of -- -- -- on your screen in just a moment now.
Is a photo of the old Packard auto plant -- apparently produced luxury cars in early nineteen hundreds and that's how -- look like when Detroit.
Was booming and these days one of those cars is probably worth what that property and that's probably true take a look at the same property now.
And this really tells a story this is not -- -- usual picture for the city of Detroit and fortunately with buildings many of them tens of thousands of them.
And shambles and basic services like garbage pick up and transportation -- -- -- reduced our.
At a standstill because of the financial straits speaking at a news conference earlier this morning Michigan governor Rick Snyder who is -- his bankruptcy filing.
Says it's really the only viable option.
I don't view that's.
As a terrible answer in the sense that now's your opportunity to stop sixty years of decline.
This is fundamental.
Has anyone like that betrayed a five years ago -- ten years ago fifteen years ago how long has this gone I'm.
And people had not stopped to say stop kicking the can down the road and do something.
We are doing something.
Let's take it from -- Steve Moore is joining us in the Wall Street Journal and after governor just said Steven -- for decades there's been questions about the financial viability.
-- Detroit why now why is the filing coming now.
Well -- -- let me just give you a couple statistics on how bad things are in Detroit right now.
You know if you look back thirty years ago John out there about two million residents of Motown.
Today that number is a little over 600000.
So that means two out of every three -- residents.
Of Detroit have left that city in the last 25 or thirty years you also have a city that is that is multi billion dollars in debt.
And the biggest problem Jana it's something we've talked about on the shelf is the enormous pension.
I doubt and and -- so much -- of the budget.
In Detroit is not going to providing services that people in Detroit want good schools.
Crime protection roads and so on -- huge percentage of the budget is going to just -- further enormous pensions of retired workers.
This I think is the crux of the problem big labor power there really has ruled that city for three decades.
So is Steve Howe says as city bankruptcy like -- Citibank -- this city filing for bankruptcy like Detroit.
Differ from let's say a company filing for bankruptcy.
Or an individual what what is different about that filing and what does it mean for some of those pensions that you say -- -- that the heart of the matter here.
Well good question and -- and you know what they've been the process is very similar for a city -- -- is for a company or an individual.
The reason -- the city goes through this kind of bankruptcy and this isn't the first time this has happened -- as just the biggest city in American history.
That has gone back -- but essentially the reason that Detroit has taken this three course is that what it allows the city to do.
Is to renegotiate.
Many of the contracts the labor contracts out many of the crowd of errors are gonna take a big hair cut here.
I was -- talking to some of Detroit officials who now say that.
Some of the people own these municipal bonds they may only get paid 2530 cents on the dollar at most so this is a way to restructure.
-- Troy -- what do you -- liberal -- let's -- you know there's there's certainly are.
Yeah questions about union power union leadership got also this city workers that negotiated these contracts that.
The people that are really affected our when's it -- worked maybe 203040.
Years for the city to figure out what happens and that.
They're probably gonna take care cut -- and the question is how much of those promised di union.
Pension benefits are they gonna receive we don't know that that is something that will be negotiated.
With the out of bankruptcy judge agenda this'll -- to what a judge and they will decide what is fair.
-- right now that the simple fact of the matter is Detroit doesn't have the money.
The pay those benefits they are they -- technically bankrupt they don't have the funds in the vault.
To attempt pay the bill so it is it is a tragedy for a lot of these workers got a because you put your finger on the problem.
A lot of these workers who -- counting on these pensions may only get fifty cents on the dollar.
Well and and we'll see we don't know exactly what -- have happened we know the right city filing also a judge has to go through the process of allowing that filing to go through but we were just seeing.
Honor screen Steve some of those buildings that you see.
And to -- Renault and living in and the windows are knocked out there 78000.
Buildings in the city of to trade.
Awaiting demolition so you mention that sometimes -- destruction the same way that a company.
In their own bankruptcy since the company divided south of Detroit is a very big city it's about a 140 square miles.
Is there potentially a scenario a precedent -- where the city.
Would divide up in two different municipalities.
And that's the way it would be states.
That's quite possible that would be one option you know.
Let me say this that Detroit has a great mayor and -- being the former and and BA basketball star.
I interviewed him a couple years ago for the paper he is a real reformer he wants to change this city and really rebuild it and I'm totally with -- -- that I think Governor Snyder has been as a -- very strong reformer as well look this actually could be good news in the long run for Detroit John I think there -- is you know what I comic American city it has a lot going for that they -- it became kind of turn away from those policies.
How much time -- dragging a balance.
Yeah first time I'm glad I did they have -- they have like a year to turn -- how much time do how would how much leeway when they get before let's say best case scenario the city re emerges and it's so much better than it was.
Ten years ago what what kind of time for -- room are we looking at.
Well again that will be decided by the bankruptcy judge about the terms of the repayment of the deaths that it almost.
But you know you're talking about you know all of the dilapidated and and got abandoned buildings one of the things that have to probably don't be done is just demolition a lot of those areas -- -- tournament the green spaces.
You know look.
Major cities can't come back a lot of cities are making a comeback.
I still think there -- a future for Detroit and I'm gonna say this I don't think this is the worst thing that could possible happen OK one last thing John -- -- there will be -- -- a bit yes.
48 federal bailout I think President Obama and the Democrats are gonna want to say well let's have the federal government.
Give tens of billions of dollars to try I don't think there's going to be a lot of support around the country for that Detroit and Michigan are gonna have to solve their own problem.
-- -- a slippery slope isn't it -- -- we talked about when bail -- first happened for companies based in Detroit -- General Motors -- do that and not bail out the city it's a question we're going to be tackling.
A little later on the program how did you know Steve that was going to be a topic of conversation today -- -- you very much free agency is always.
Thank you -- and a bit later.
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