I’ve had my eye on Detroit’s bankruptcy proceedings because it is indicative of what’s to come for a lot of cities. How Detroit deals with its bankruptcy could also set a precedent for other cities forced to deal with the decisions of bankruptcy, satisfying pensions and debtors. Unfortunately, Detroit’s Emergency Manager Kevin Orr is shirking his responsibilities to the city and creditors by not making the hard choices to put Detroit on sound financial footing.
As I wrote a few months ago, the key is the art.
Or as Greg Gutfeld said on The Five, “Sell the damn art.”
However, Orr is still standing by while liberal elitists in Detroit play a shell game with the art’s valuation to avoid using the art to alleviate cuts to pensions and what is owed to creditors. The latest proposal to pay nickels on the dollar to bondholders does nothing to insure Detroit won’t fall into financial peril again. It will discourage bondholders from investing in plans to rebuild Detroit. If creditors are not treated fairly, it will stall the city’s renaissance. From Reuters:
The significant haircut and treatment of general obligation bonds as unsecured debt likely will upset participants in the $3.7 trillion municipal bond market, where such bonds have long been considered a safe bet for investors. Some have warned investors will demand to be paid more to lend to Detroit and other local Michigan governments and school districts.
“We believe this is contrary to bankruptcy law and will result in costly litigation that will hamper the city’s emergence from bankruptcy,” said Steve Spencer, a financial adviser to bond insurer Financial Guaranty Insurance Co, regarding the uneven treatment of pensions and bonds in the plan.
The Michigan legislature should reject Emergency Manager Kevin Orr’s plan and present something that will satisfy Detroit’s obligations in a meaningful way, not just one that pleases elitists. Selling the DIA’s collection for the benefit of all creditors, not just pensioners, is necessary to ensure Detroit’s revitalization.