Wednesday, December 04, 2013

DETROIT - Bankruptcy Ruling

"Pensioners will face negotiations as Detroit starts road to financial recovery" PBS Newshour 12/3/2013


JUDY WOODRUFF (Newshour):  Finally: the choices ahead as Detroit moves forward with bankruptcy.

Today's ruling by a federal judge begins to clear the way for it to happen, and he said public pensions could be cut as part of other changes aimed at shedding billions in debt.  Unions and pension funds had argued that Michigan's state Constitution protected those pensions.
CHRISTY MCDONALD, Detroit Public Television: It was.

But, Judy, he had to answer several legal questions before he could clear the way for Detroit's eligibility for Chapter 9.  One of those is, is the city insolvent?  And the judge found, yes, the city is insolvent.  It can't pay its debts.  And no one really argued that point there.  There is an $18 billion debt.

The other question he had to answer was, did the city negotiate in good faith with its creditors before they even filed for bankruptcy?  And while he chastised the city and said, you know what, the city really didn't negotiate in good faith, he moved to the next legal question was, did the city -- was it even possible for them to negotiate?

And he said it really wasn't, given the fact they had 100,000 creditors and an $18 billion debt.  And then the other question he had to answer was, was it constitutional to file for bankruptcy?  And, indeed, he said, yes, it was.

And, interestingly enough, the judge said that Detroit should have and could have filed for bankruptcy even years ago, given the financial situation it is in.

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